FTX Disputes Three Arrows Capital's $1.53 Billion Claim

FTX's bankruptcy estate lawyers have filed an objection to a $1.53 billion claim made by Three Arrows Capital, as part of the ongoing bankruptcy proceedings. The dispute revolves around the potential impact of this claim on the broader FTX creditor pool, which could significantly affect their recovery rates.

FTX's legal team argues that the claim, which has been expanded from an original $120 million, is inflated and unjustified. The U.S. Bankruptcy Court in Delaware had previously ruled in favor of Three Arrows Capital. The hedge fund, now defunct, was managed by Su Zhu and Kyle Davies. FTX, formerly led by Sam Bankman-Fried, disputes the validity of the claim, asserting that its true value is only $284 million.

Louis D'Origny, CFO of FTX Creditors, highlighted the potential consequences of the ruling, stating that it could increase the claim pool by 20%, leading to significantly lower recoveries for customer creditors if Three Arrows Capital's $1.5 billion claim is approved in FTX.

The legal proceedings could have a substantial impact on the distribution of remaining assets to creditors. If the claim is approved, individual creditor recoveries could be reduced by approximately 20%. This scenario mirrors past crypto insolvencies, such as those involving Mt. Gox and Celsius, where late-stage claims influenced creditor expectations and outcomes.

Analysts caution about potential volatility in token markets managed by both entities, including ETH and BTC. Observers are speculating on possible regulatory outcomes, emphasizing the case's potential to shape future crypto bankruptcy procedures. The dispute highlights the challenges in determining creditor rights during large insolvencies.