FTX Challenges 3AC's $1.53 Billion Claim in Bankruptcy Dispute
By: Isha Das
In a landmark legal showdown in the cryptocurrency world, FTX is vigorously contesting a substantial $1.53 billion claim filed by the now-insolvent crypto hedge fund, Three Arrows Capital (3AC). The contentious claim has sparked a heated legal debate, with FTX's legal representatives arguing that the demand is both 'unreasonable and unsupportable.' They assert that the alleged financial losses stem from 3AC's own risky trading decisions, which should not burden FTX's creditors.
According to the court filings submitted by FTX's legal team to a Delaware bankruptcy judge, the hedge fund's claim is heavily inflated beyond its original $120 million credit line with FTX. At the crux of the dispute are margin trades from 2022, where 3AC reportedly breached margin requirements amid market turmoil following the TerraUSD stablecoin collapse. FTX contends that it rightfully liquidated 3AC’s account after notifying the firm of its deteriorating collateral situation, recovering $82 million in the process.
The liquidation of 3AC's account, FTX’s attorneys argue, was not only contractually sanctioned but essential to avert a deeper fiscal hole in FTX's estate. The removal of 3AC's positions was vital to stave off further insolvency issues that could have adversely affected FTX's legitimate creditors. FTX's counsel has produced testimonies and expert opinions buttressing their claim that the liquidation was both requisite and executed in good faith to preserve estate value.
The escalating legal tension underscores the broader implications of the collapse of both FTX and 3AC. FTX alleges that 3AC’s claims are attempting to unjustly reallocate value from FTX's creditors to remedy 3AC's own liquidation fallout. This battle represents a significant chapter in the convoluted aftermath of significant crypto institutional failures. The court is set to hear further arguments as 3AC must file a formal response to FTX’s objections by mid-July, with further hearings scheduled in August.
