Bankrupt crypto alternate FTX has mentioned it shouldn’t should pay a large $1.53 billion restoration declare by Three Arrows Capital, arguing in a current court docket submitting that the crypto hedge fund’s “own risky [trading] strategy caused its collapse, and its own account activity — not any action by [FTX] — resulted in a significant decline in the “value” related to the 3AC Accounts in June 2022.”
“3AC bet big that cryptocurrency prices would increase using cash it did not have and, when prices instead plummeted, 3AC proceeded to liquidate the risky bets it had placed and withdraw assets from [FTX],” FTX’s legal professionals wrote within the submitting.
The Delaware court docket overseeing FTX’s chapter gave 3AC’s liquidators permission to increase their declare earlier this yr, bumping it up considerably from their unique declare of $120 million. This got here after 3AC’s legal professionals allegedly found new proof suggesting that FTX had liquidated $1.53 billion of 3AC’s belongings two weeks earlier than the hedge fund began its personal liquidation proceedings in June 2022. FTX’s legal professionals say the liquidation of 3AC’s belongings on its platform was carried out to fulfill a mortgage to FTX — however 3AC’s legal professionals pushed again, arguing that the mortgage to FTX wasn’t sufficiently documented or in any other case substantiated. The chapter court docket sided with 3AC, discovering inadequate proof to help FTX’s declare of a mortgage.
In the newest submitting, legal professionals for FTX’s property mentioned that on June 12, 2022 the precise worth of belongings in 3AC’s accounts was solely $284 million — $1.017 billion in digital belongings and adverse $733 million in US {dollars}. In addition they added that the “first and only” liquidation of 3AC’s belongings ordered by FTX was on June 14, 2022, and swapped $82 million in crypto for money — a transfer they argued “actually benefitted 3AC (not FTX).”
“The Joint Liquidators grossly inflate the actual $284 million value of assets associated with the 3AC Accounts on June 12, 2022 by more than $1.2 billion, and they ignore that the entire loss in account value resulted from market price declines and 3AC’s own withdrawals, not any action taken by FTX,” the bankrupt alternate’s legal professionals wrote.
“The Joint Liquidators ask this Court to force other Exchange customers and creditors to foot the bill for 3AC’s failed strategy by asserting illogical and baseless claims for $1.53 billion…
[T]his is a false premise that lacks any legal or factual merit, and, in fact, 3AC is owed nothing,” the legal professionals added.
FTX, which was at one time one of many largest crypto exchanges on the earth, filed for chapter safety shortly after its collapse in November 2022. The alternate’s restoration belief began distributing $5 billion to FTX collectors in Might.
3AC collapsed in June 2022, one month after the collapse of the Terra/LUNA ecosystem, beginning a domino-like collapse of main crypto corporations together with Voyager, Celsius, BlockFi and Genesis.
3AC has till July 11 to file an objection earlier than the listening to set for August 12.
