Three Arrows Capital Boosts FTX Claims to $1.53 Billion

The United States Bankruptcy Court for the District of Delaware has granted a motion allowing the joint liquidators of Three Arrows Capital (3AC) to amend their original proof of claim in the FTX bankruptcy proceedings. This amendment increases their claims from $120 million to $1.53 billion. The amended filing broadens 3AC’s allegations against FTX to include breach of contract, breach of fiduciary duty, unjust enrichment, and proprietary restitutionary claims.

The ruling stems from a motion filed by 3AC’s liquidators, Russell Crumpler and Christopher Farmer. Initially, the liquidators filed their proof of claim in June 2023, seeking to recover funds related to preference, conversion, and other avoidance actions tied to a $120 million loan allegedly owed by 3AC to FTX. However, after further investigation, the liquidators determined that 3AC’s dealings with FTX were far more extensive.

According to court documents, the liquidators faced substantial obstacles during their investigation, including a lack of proper records from 3AC and minimal cooperation from the company’s founders, Kyle Davies and Su Zhu. Delays in receiving critical documents and data compounded these challenges, with much of the key information only made available in late 2023 and early 2024. This delay prevented the liquidators from fully understanding the scope of 3AC’s transactions with FTX until after the original claims deadline had passed.

“The information obtained by the Liquidators in the year since they filed their Original POC led them to the new conclusion that just two weeks before the commencement of the 3AC Liquidation, the $1.53 billion of assets that 3AC had on the FTX platform were liquidated to satisfy $1.3 billion in liabilities to FTX,” the document read.

Judge John T. Dorsey noted that the evidence makes clear that the description of the facts contained in the Original POC was based on the limited information that the Liquidators had available to them at that time.

FTX objected to the motion, arguing that the amendment was filed too late and expanded the scope of the claims, violating the bankruptcy process. The debtors claimed that the original proof of claim did not provide sufficient notice of the nature or the amount of the newly proposed claims. However, the court dismissed FTX’s objections, siding with 3AC’s liquidators and approving the expanded claim. Additionally, the court found that much of the delay in filing the amended claim was attributable to FTX’s failure to provide the necessary documents to the liquidators promptly.

“Having considered all the evidence presented, I find that the balance of the equities is in favor of allowing the Amended POC,” Judge Dorsey noted.

This development occurs alongside ongoing efforts by former FTX CEO Sam Bankman-Fried to secure a pardon from President Donald Trump. Bankman-Fried has sought to align himself with right-wing figures, recently appearing on Tucker Carlson’s show and reportedly consulting with a lawyer linked to Trump. Despite Trump’s history of pardons, skepticism remains due to Bankman-Fried’s lack of support in the crypto community.