3AC Liquidators Win $1.53 Billion Claim Against FTX

The liquidators of Three Arrows Capital (3AC) have been granted permission by a US bankruptcy court to increase their claim against the defunct FTX exchange from $120 million to $1.53 billion. This decision is a pivotal moment in the ongoing bankruptcy proceedings, which have drawn significant attention from the crypto community and stakeholders alike. The court's ruling not only highlights the challenges in asset recovery but also underscores the broader impact of FTX's collapse on associated entities.

Chief Judge John Dorsey, in his ruling on March 13, acknowledged that the liquidators had presented their claim in a timely manner. He noted that the delays in filing the amended proof of claim were largely due to FTX's operational failures. Dorsey stated, “The evidence also suggests that the Liquidators were diligent in attempting to obtain the information and that despite having the complete information in their possession, the Debtors repeatedly delayed giving it to them.” This ruling emphasizes how procedural delays and lack of transparency can complicate bankruptcy claims.

The liquidators initially filed a claim of $120 million in June 2023, but later expanded their allegations to include breach of contract, unjust enrichment, and breach of fiduciary duty towards 3AC. According to their filings, FTX is accused of mishandling $1.53 billion worth of assets that were liquidated to settle an estimated $1.33 billion in liabilities back in 2022, causing significant harm to 3AC’s creditors.

3AC’s liquidators argue that FTX’s liquidation of assets was avoidable and that it severely harmed the interests of their creditors. This case exemplifies the difficulties of recovering funds once managed by failing crypto enterprises. With FTX’s own bankruptcy proceedings leading to extensive legal disputes, this situation reflects a broader trend of financial distress among cryptocurrency firms.

The outcomes of these legal battles will likely have lasting implications not only for the involved parties but for the wider cryptocurrency landscape as well. Bankruptcy filings have become increasingly common within the crypto sector, raising questions about regulatory oversight and creditor protections. Stakeholders are watching closely as these proceedings unfold and precedent-setting decisions emerge.

As FTX continues its recovery efforts, it has also initiated lawsuits against several firms, including SkyBridge Capital and Binance, seeking to recoup significant amounts spent by former management. The ripple effects of these claims could lead to further investigations into how assets were utilized and potentially pivot towards broader regulatory scrutiny within the crypto industry.

The recent approval of an expanded claim by 3AC liquidators against FTX demonstrates the complexities and intricacies of bankruptcy proceedings in the cryptocurrency space. With FTX navigating its own recovery efforts while facing increasing legal challenges, the future of financial governance within crypto markets remains uncertain. Observers anticipate that the outcomes of these legal battles will set critical precedents for insolvency processes and recovery strategies in this volatile sector.