FTX, the bankrupt cryptocurrency exchange, is taking a stand against a $1.53 billion recovery claim filed by Three Arrows Capital (3AC). In a recent court document, FTX contended that the hedge fund’s own unsound trading practices led to its collapse, insisting that the significant downturn in the value of 3AC’s assets in June 2022 was due to its own actions, not FTX’s.
Key Points:
- FTX claims it should not be liable for 3AC’s $1.53 billion recovery claim.
- The Delaware bankruptcy court has allowed 3AC’s liquidators to expand their claim significantly from an initial $120 million earlier this year.
- 3AC is required to respond to FTX’s filing by mid-July.
In their argument, FTX’s lawyers described 3AC’s trading strategy as perilous, stating, “3AC bet big that cryptocurrency prices would increase using cash it did not have, and, when prices instead plummeted, 3AC liquidated its risky investments and withdrew assets from FTX.”
The court’s approval for 3AC’s escalated claim came after new evidence suggested that FTX had liquidated $1.53 billion worth of 3AC assets just weeks before the hedge fund began its own liquidation in June 2022.
FTX’s legal team claims that the actual assets in 3AC’s accounts as of June 12, 2022, were only approximately $284 million and highlighted that the first liquidation was recorded on June 14, 2022, which benefited 3AC. FTX dismissed the liquidators’ inflated valuation as unfounded, urging the court to deny 3AC’s assertion that it is owed any amount.
The exchange, once a giant in the crypto industry, filed for bankruptcy protection shortly following its collapse in November 2022 and is currently distributing $5 billion to creditors. 3AC, which faced its own collapse just weeks after a major market downfall, has until July 11 to file a formal objection prior to the scheduled hearing on August 12.
