Key Takeaways
- 3AC accuses FTX of prematurely liquidating 3AC’s assets just weeks before the hedge fund’s collapse
- 3AC alleged FTX delayed providing necessary information, forcing 3AC to look into raw data to calculate losses
The liquidators of Three Arrows Capital (3AC), the now-defunct hedge fund, have raised their bankruptcy claim against the crypto exchange FTX from $120 million to $1.5 billion. The updated claim accuses FTX of prematurely liquidating 3AC’s assets just weeks before the hedge fund’s collapse, arguing that these sales were unfair and undervalued the assets.
According to the court filing, 3AC alleges that FTX seized around $1.33 billion worth of the hedge fund’s assets to settle outstanding debts. The liquidators claim that the abrupt liquidation not only devalued the assets but also severely harmed 3AC’s creditors.
The hedge fund alleged the actions breached both contractual and fiduciary duties, as the assets were sold at low market prices without providing proper notice or transparency. The liquidators only discovered the full extent of the losses in August, suggesting that FTX failed to disclose critical information needed for an accurate assessment of 3AC’s assets.
In response, FTX disputes these allegations, asserting that the liquidation was initiated by an unnamed individual linked to Three Arrows Capital. The person’s identity remains unclear, but FTX maintains that the sales were authorized and that the exchange acted within legal parameters. The dispute is set to be addressed in court on November 20, where the judge will consider both sides’ arguments.
This is not the first time 3AC liquidators have pursued recovery efforts against various crypto firms. In a separate case, 3AC has filed a $1.3 billion lawsuit against Terraform Labs, the company behind the collapsed TerraUSD (UST) stablecoin and its token, LUNA. The liquidators accuse Terraform Labs of misleading them about the stability of these assets before their collapse.
Meanwhile, FTX, entangled in its own bankruptcy proceedings, has launched a series of lawsuits aimed at recovering lost funds. On November 8, FTX filed a $100 million claim against SkyBridge Capital and its founder, Anthony Scaramucci, seeking to recoup investments made by its former CEO, Sam Bankman-Fried. Additionally, FTX filed lawsuits against Binance and Waves founder Aleksandr Ivanov, attempting to retrieve millions in crypto assets.