Three Arrows Capital Boosts FTX Claim to $1.53 Billion

A US bankruptcy court has authorized the liquidators of the defunct crypto hedge fund Three Arrows Capital (3AC) to increase their claim against the collapsed crypto exchange FTX from $120 million to $1.53 billion. This decision comes after Chief Judge John Dorsey rejected FTX’s debtors’ argument that the amended proof of claim (POC) from 3AC liquidators was untimely and an unjust attempt to slow the bankruptcy proceedings.

In a ruling on March 13 in the US Bankruptcy Court for the District of Delaware, Dorsey stated that 3AC liquidators had provided sufficient notice of their claim and the possibility of amending it once they had analyzed all the available information. He noted that any delay was caused by FTX’s failure to share relevant records promptly. Dorsey emphasized that the evidence suggested the delay in filing the Amended Proof of Claim was largely due to FTX’s own actions. He also noted that the liquidators were diligent in attempting to obtain the necessary information, despite FTX repeatedly delaying the provision of this information.

3AC liquidators initially filed a $120 million claim in FTX’s bankruptcy case in June 2023. They later expanded this claim in November 2024, alleging claims including breach of contract, unjust enrichment, and breach of fiduciary duty. The liquidators alleged that FTX held $1.53 billion in the hedge fund assets that were liquidated to settle $1.33 billion in liabilities in 2022. They argued that these transactions were avoidable and caused harm to 3AC creditors, and that FTX debtors had delayed providing the information that would have uncovered the liquidation.

FTX debtors objected to the amended claim, stating that the original POC was insufficient to inform them about the nature and amount 3AC liquidators would be claiming. They argued that the amended claim came too late and should be disallowed. However, Judge Dorsey’s ruling supported the liquidators’ position, allowing the increased claim to proceed.

Before its collapse in June 2022, Three Arrows Capital was once one of the industry’s largest crypto hedge funds, with over $3 billion in assets. Its liquidators have also pursued claims against the collapsed crypto firm Terraform Labs through a $1.3 billion claim in Terra’s bankruptcy case. At the same time, FTX, which filed for bankruptcy in November 2022, has been undertaking its own recovery efforts to reclaim funds. In November last year, it filed a trio of lawsuits to recoup funds spent by former FTX CEO Sam “SBF” Bankman-Fried on sponsorship and investment deals, as well as to recover cryptocurrency sent to exchanges and other entities.