TLDR
- 3AC's liquidators greenlit by US Bankruptcy Court to expand FTX claim to $1.53 billion, up from $120 million.
- The broadened claim points fingers at FTX for contract breaches, fiduciary lapses, and gaining unfair advantages.
- Judge Dorsey's ruling favored 3AC, citing holdups due to FTX's failure to timely hand over crucial documents.
- 3AC, once a heavyweight in the crypto hedge landscape with assets beyond $3 billion, crumbled in June 2022 amid a market crash.
- This decision adds another chapter to the ongoing drama entangling Sam Bankman-Fried, who is currently courting President Trump for a pardon.
US Bankruptcy Court in Delaware has granted a game-changing motion in the crypto world.
Liquidators of Three Arrows Capital (3AC) can now hike their FTX claim from $120 million to $1.53 billion.
The court's recent verdict is a major milestone in the bankrupy case. Judge John T. Dorsey nodded at the motion from 3AC's liquidators, Russell Crumpler and Christopher Farmer.
Back in June 2023, the liquidators first approached the court to reclaim funds tied to a supposed $120 million loan 3AC took from FTX.
Probing further unveiled larger interactions between the two entities. Just before 3AC folded, approximately $1.53 billion of its assets on FTX were liquidated.
Those assets covered $1.3 billion in FTX liabilities, pushing liquidators to beef up their claim against the insolvent crypto exchange.
They revised the filing with new charges against FTX, listing contract violation, duty breaches, and undue benefits.
The challenges have been steep for the liquidators, grappling with scant records from 3AC and lackluster collaboration from its founders, Kyle Davies and Su Zhu.
Acquiring essential paperwork was tricky, and critical info surfaced only in late 2023 and early 2024 after FTX went bankrupt in November 2022.
FTX Objections
FTX opposed the expansion of the claim, arguing it was too late and beyond the scope of the bankruptcy rules.
FTX contended that the initial claim didn't sufficiently outline the claim's nature or scale, but Judge Dorsey dismissed this.
The court sided with 3AC's liquidators on the enlarged claim, suggesting delays owed much to FTX's delay in document delivery.
Judge Dorsey commented, 'After assessing all the proof, the equities prompt me to greenlight the Amended POC.' He remarked that filing delays largely stemmed from the Debtors' own actions.
Previously towering over the crypto hedge fund domain, Three Arrows Capital managed more than $3 billion before it fell apart in June 2022.
Its downfall followed a steep decline in crypto markets, with 3AC having risky bets on digital currencies like TerraUSD, which imploded in May 2022.
3AC Collapse
The fall of 3AC reverberated through the crypto sphere, coursing through and affecting lenders like Voyager Digital and BlockFi.
According to court paperwork, as of June 12, 2022, 3AC had $1.53 billion in FTX assets, liquidated over the following days to offset a $1.3 billion FTX debt.
The recent ruling tacks another layer onto the FTX bankruptcy story, with accusations of deceit and poor management under ex-CEO Sam Bankman-Fried.
In the meantime, Bankman-Fried pursues an alternative angle, reportedly seeking clemency from President Trump.
Aligning himself with conservative figures, Bankman-Fried appeared on Tucker Carlson's platform, consulting a lawyer with Trump ties.
Despite Trump's history with pardons, skepticism remains; Bankman-Fried's limited crypto community backing could impede his clemency bid.
3AC's broadened claim approval lands 15 months after another significant event. In December 2023, liquidators of 3AC clinched a global asset freeze worth $1.4 billion tied to its founders.
The British Virgin Islands court barred Zhu, Davies, and Davies’ wife, Kelly Chen, from accessing funds until claims against them are resolved.
Liquidators assert that founders should bear responsibility, pointing to poor financial decisions in 3AC's final weeks.
3AC co-founder Su Zhu faced arrest in Singapore in September 2023, caught at Changi Airport trying to exit the country amid a court order from Singapore.
