FTX Rejects 3AC's $1.5 Billion Claim Over Failed Trading Strategy

FTX has rejected a substantial $1.5 billion claim from Three Arrows Capital (3AC), asserting that the hedge fund's losses stemmed from a high-risk trading strategy rather than any wrongdoing by the exchange. This dispute highlights the ongoing complexities in the aftermath of major crypto market collapses.

FTX Claims 3AC Liquidators Inflated Value of Account Balances: Kroll Restructuring Administration

FTX Rejects 3AC's Billion-Dollar Claim

FTX's legal team has formally objected to Three Arrows Capital's (3AC) $1.53 billion recovery claim, labeling it "illogical and baseless." The objection, filed in the US Bankruptcy Court for the District of Delaware, argues that 3AC's significant losses were a direct consequence of its own speculative trading decisions, particularly its "bet big" strategy on rising crypto prices. When the market plummeted, 3AC became a victim of its "own risky strategy," according to FTX's lawyers.

FTX contends that allowing 3AC's claim would unfairly burden other creditors and customers.

Discrepancies in Account Balances and Liquidation

Central to the dispute is the accuracy of 3AC's claimed account balances. FTX lawyers assert that 3AC's $1.53 billion figure relies on inaccurate data from June 12, 2022. They argue that 3AC's crypto balance was $1.02 billion, not $1.59 billion, and its negative USD amount was $733 million, not $1.3 billion. FTX maintains that 3AC's available balance was only $284 million, which was further diminished by market declines and $60 million in withdrawals by 3AC.

FTX also clarified that the only liquidation against 3AC amounted to $82 million in crypto. This liquidation, they claim, was "contractually permitted" under existing credit and margin agreements to ensure compliance with account balance requirements. Furthermore, FTX argues that this liquidation actually benefited 3AC by converting volatile digital assets into stable fiat currency, thereby preserving value.

Legal Proceedings and Broader Implications

This objection is the latest development in a protracted legal battle. 3AC liquidators initially filed a $120 million claim in June 2023, which was later expanded to $1.53 billion in November 2024, alleging breach of contract, fiduciary duty, and unjust enrichment. Chief Judge John Dorsey approved the motion to expand the claim in March.

3AC has until July 11 to file a reply to FTX's objection. A non-evidentiary hearing is scheduled for August 12 before Chief Judge Karen Owens in the US Bankruptcy Court for the District of Delaware. This case is one of many ongoing recovery efforts in the crypto space, with both FTX and 3AC pursuing various claims against other collapsed entities, such as 3AC's $1.3 billion claim against Terraform Labs.

Sources

• FTX Lawyers Want $1.53 Billion 3AC Claim Tossed, Cointelegraph.

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