FTX Fires Back: Disputes Three Arrows Capital’s Whopping $1.5B Bankruptcy Claim

FTX draws a line in the sand—bankrupt hedge fund Three Arrows Capital just got served a reality check.

Subheader: The $1.5 Billion Standoff

FTX isn’t buying what 3AC is selling. The collapsed crypto hedge fund’s bankruptcy claim—a cool $1.5 billion—faces fierce opposition from Sam Bankman-Fried’s embattled exchange. No rubber-stamping here.

Subheader: Creditors Circle, Lawyers Profit

Another day, another crypto bankruptcy bloodbath. While traders lick wounds, attorneys rack up billable hours. The only certainty? Someone’s getting paid—just probably not the investors.

Closer: When giants fall, the lawsuits fly. Grab your popcorn—this one’s going to trial.

TLDR

• FTX’s bankruptcy estate is fighting a $1.5 billion claim from collapsed hedge fund Three Arrows Capital (3AC)
• FTX argues 3AC’s losses came from risky trading and market declines, not FTX’s actions
• The dispute centers on whether 3AC held $1.6 billion or just $284 million net value on FTX
• 3AC expanded its claim from $120 million to $1.53 billion in November 2024
• A court hearing is scheduled for August 12, with 3AC’s response due July 11

The FTX bankruptcy estate is challenging a massive $1.5 billion claim from failed hedge fund Three Arrows Capital. Lawyers for FTX filed a 94-page objection on June 20 in Delaware bankruptcy court.

The dispute focuses on how much crypto 3AC actually held when both companies collapsed in 2022. Three Arrows Capital claims its account balance was nearly $1.6 billion. FTX says the real net value was only $284 million after accounting for $733 million in margin debt.

FTX lawyers argue that 3AC is trying to make other creditors pay for its own trading losses. The filing states that “FTX creditors should not be a backstop for 3AC’s failed trades.” They describe 3AC’s claim as “illogical and baseless.”

The $284 million in 3AC’s account disappeared over two days in June 2022 as crypto prices fell. Market declines wiped out $222 million of that amount. Another $60 million was withdrawn by 3AC itself before any liquidation occurred.

FTX only liquidated $82 million from the account, which the estate says was allowed under contract terms. The liquidation helped prevent the account from going negative. FTX argues this preserved value rather than destroyed it.

The Legal Battle Unfolds

Three Arrows Capital first filed a $120 million claim in mid-2023. The hedge fund expanded this to $1.53 billion in November 2024. 3AC’s liquidators claim FTX breached its duties and delayed sharing important information about the liquidations.

A bankruptcy judge previously ruled in favor of 3AC on discovery issues. However, the main claim is still under review. Chief Judge John Dorsey allowed 3AC to expand their claim despite FTX’s objections.

FTX disputes how 3AC calculated its numbers. The estate says 3AC used inflated balances and ignored important offsets. At its peak, 3AC’s balance showed $1.02 billion in crypto, not the claimed $1.59 billion.

The collapse happened after Terra Luna crashed in May 2022. This sent crypto prices falling across the market. 3AC’s account balance dropped below the required $240 million minimum in June 2022.

Contract Breach and Liquidation

When FTX contacted 3AC about the breach, the hedge fund ignored them for over six hours. Instead of adding funds, 3AC withdrew $18 million in ethereum from the account. This forced FTX to begin liquidation procedures.

FTX converted the volatile crypto holdings into US dollars through the liquidation. The estate argues this was a contractual step, not a seizure of assets. The action was taken under the credit and margin agreements both parties had signed.

Forensic expert Steven Coverick from Alvarez & Marsal supported FTX’s position. He wrote that the liquidation “was reasonable and necessary” to prevent negative balances. Without the liquidation, 3AC’s account WOULD have been $18 million underwater by FTX’s bankruptcy date.

Legal expert Stephen Atherton also provided an opinion. He stated that 3AC’s legal theories under British Virgin Islands law are “legally unsound.” This challenges the foundation of 3AC’s expanded claim.

If the judge sides with FTX, 3AC’s claim could be denied entirely. The hedge fund might only receive an unsecured claim worth a small fraction of the requested amount. Three Arrows Capital has until July 11 to file its response, with a court hearing set for August 12.