FTX’s chapter property is pushing again in opposition to a $1.5 billion declare from Three Arrows Capital, arguing the failed hedge fund is attempting to get well losses from its dangerous bets.
In a 94-page objection filed June 20 within the U.S. Chapter Court docket in Delaware, attorneys for the FTX Restoration Belief requested the choose to totally disallow 3AC’s declare, calling it “illogical and baseless.”
The dispute facilities on how a lot crypto 3AC really held on FTX when each companies collapsed in mid-to-late 2022. The hedge fund claims its account steadiness was almost $1.6 billion, however FTX says the web worth was simply $284 million, after subtracting $733 million in margin debt.
The submitting argues that 3AC has ignored its liabilities and now needs different collectors to cowl losses from a closely leveraged place. “FTX creditors should not be a backstop for 3AC’s failed trades,” the property wrote.
Many of the $284 million evaporated over two days in June 2022 as crypto costs fell. Of that quantity, $222 million was misplaced to market declines, and one other $60 million was withdrawn by 3AC itself. FTX says it solely liquidated $82 million, absolutely allowed below contract phrases, and that doing so helped stop the account from turning damaging.
3AC’s declare, which initially stood at $120 million in mid-2023, was expanded to $1.53 billion in November 2024. The hedge fund’s liquidators allege FTX breached its duties and delayed disclosing key details about the liquidations. Chief Decide John Dorsey beforehand dominated of their favor on discovery points, however the general declare stays below evaluation.
FTX says the liquidation was not a seizure of property however a contractual step that transformed risky crypto into U.S. {dollars}. That shift, they argue, preserved worth for 3AC somewhat than destroying it.
The property additionally disputes how 3AC calculated its numbers, saying the fund relied on inflated balances and ignored offsets. At its peak, 3AC’s steadiness confirmed $1.02 billion in crypto, not $1.59 billion, and owed $733 million, not $1.3 billion, in accordance with the objection.
If the choose agrees with FTX, 3AC’s declare would seemingly be denied fully or diminished to an unsecured declare, entitling it to solely a small restoration. A reply from 3AC is due by July 11, and a court docket listening to is scheduled for Aug. 12.
