- A U.S. bankruptcy judge has allowed Three Arrows Capital (3AC) liquidators to amend their claim against FTX from $120 million to $1.53 billion
- The amended claim includes allegations of breach of contract, unjust enrichment, and conversion related to the liquidation of 3AC’s assets on FTX’s platform
- The court ruled that the original claim sufficiently notified FTX of potential liabilities, and FTX’s delay in providing information contributed to the late amendment
A U.S. bankruptcy judge has granted the liquidators of Three Arrows Capital (3AC) permission to significantly increase their claim against FTX from $120 million to $1.53 billion. The ruling follows months of legal disputes over whether 3AC’s liquidators had sufficiently notified FTX of their claims before the court-imposed deadline. The amended claim alleges that FTX improperly liquidated 3AC’s assets just before the hedge fund collapsed in June 2022.
FTX’s Alleged Role in 3AC’s Collapse
Three Arrows Capital, once a leading cryptocurrency hedge fund, collapsed in mid-2022 following turmoil in the crypto markets. The firm had significant assets on FTX, which were liquidated between June 12 and June 14, 2022. According to the 3AC liquidators, this liquidation effectively wiped out $1.53 billion in assets to settle a $1.3 billion liability owed to FTX.
The liquidators argue that this transaction amounted to an unlawful preference that unfairly favored FTX over other creditors. They also claim that FTX’s failure to file its own creditor claim in 3AC’s liquidation proceedings further supports their case.
FTX’s legal team opposed the amended claim, arguing that the original proof of claim—filed in June 2023—did not adequately indicate the scope of potential liabilities. However, the court disagreed, ruling that FTX had enough information to anticipate the broader claims. In his ruling, Judge John Dorsey noted that FTX had access to key financial records for nearly a year but failed to share them with 3AC’s liquidators, significantly delaying their investigation:
The evidence suggests that the delay in filing the Amended POC was, in large part, caused by the Debtors themselves.
Impact on FTX’s Bankruptcy Proceedings
FTX is in the midst of restructuring under bankruptcy protection, and the inclusion of a $1.53 billion claim could complicate its repayment plan. FTX had argued that the late amendment would disrupt the case, but Judge Dorsey found no clear evidence of prejudice against FTX.
With the court’s decision, 3AC’s liquidators can now pursue their full range of claims, including breach of contract, turnover, unjust enrichment, and breach of fiduciary duty. The case highlights the ongoing legal entanglements stemming from the collapse of major crypto firms in 2022, as creditors seek to recover lost funds from bankrupt exchanges and hedge funds.
