FTX vs. 3AC: Court Approves $1.53B Claim Expansion

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According to news sources, the court granted Three Arrows Capital 3AC liquidators expanded authority to seek up to $1.53 billion from FTX cryptocurrency exchange through a recent judicial decision in US bankruptcy proceedings. The court gave its green light to authorize 3AC liquidators to expand their FTX claim from $120 million to $1.53 billion after initiating their original FTX funds recovery lawsuit in June 2023.

3AC

The March 13th ruling from Chief Judge John Dorsey proved essential to the ongoing financial recovery process led by Three Arrows Capital’s liquidators who aim to retrieve FTX bankruptcy-affected assets for creditors.

The Ruling and Court’s Reasoning

Following a bitter battle between FTX’s debtors and the liquidators, the court authorized the increase of the claim. FTX originally fought against permitting the liquidators to file their claim because the debtors claimed the request arrived too late for court approval. Despite FTX’s objections about the filed proof of claim delay resulting from its late information sharing, Judge Dorsey dismissed these claims because FTX’s failure to share information was mainly responsible for the delay.

“The evidence suggests that the delay in filing the Amended Proof of Claim was, in large part, caused by the Debtors themselves,” Judge Dorsey said in his ruling.

The 3AC liquidators proved their diligence because they put much effort into obtaining necessary information, but FTX repeatedly delayed their efforts.

Background on the 3AC Claim

The lawsuit 3AC filed against FTX started within weeks of the collapse of these two companies in 2022. The cryptocurrency hedge fund Three Arrows Capital with $3 billion in assets became bankrupt during a string of money troubles. The liquidators presented their initial $120 million legal claim to FTX during June 2023 for alleged asset mismanagement of 3AC funds. The liquidators discovered the extent of issues which caused them to amend their original $120 million claim to $1.53 billion in November 2024.

According to the liquidators “these transactions between Three Arrows Capital and its creditors could have been avoided because they resulted in financial loss for 3AC creditors.”

FTX’s Response and Ongoing Legal Challenges

The Legal Challenges Faced by FTX after its response to Customer Demands in Court

3AC’s liquidators achieved success when this court made its latest ruling although the development introduced new complications to FTX’s active bankruptcy status. The bankrupt exchange operates under several lawsuits that work to retrieve their assets after filing for bankruptcy in November 2022. The bankruptcy filing lawsuit FTX has initiated challenges both Anthony Scaramucci of SkyBridge Capital and the Binance crypto exchange to recover funds involved in previous transactions.

FTX’s legal representation disputed the amended claim because they argued that the initial POC lacked enough information about both the type and financial value of the claim. The legal argument against the claim included its delayed filing because this could delay FTX’s bankruptcy settlement process. In spite of FTX’s legal team opposing this move the court gave authority to 3AC’s liquidators for proceeding with their more extensive claim.

Implications for the Crypto Industry

The liquidators submitted an altered claim that presents accusations against FTX for breaking contractual agreements while enriching themselves and failing to maintain proper fiduciary duties. 3AC’s assets totaling $1.53 billion remained with FTX until the exchange used all funds to pay off $1.33 billion in outstanding liabilities. According to the liquidators, these transactions between Three Arrows Capital and its creditors could have been avoided because they resulted in financial loss for 3AC creditors.

Conclusion

FTX faces ongoing legal battles following its responses to the claims that FTX held $1.53 billion in 3AC’s assets. 3AC’s liquidators achieved success when this court made its latest ruling although the development introduced new complications to FTX’s active bankruptcy status. The bankrupt exchange operates under several lawsuits that work to retrieve their assets after filing for bankruptcy in November 2022. The bankruptcy filing lawsuit FTX has initiated challenges both Anthony Scaramucci of SkyBridge Capital and the Binance crypto exchange to recover funds involved in previous transactions.

Frequently Asked Questions (FAQs)

Why did Three Arrows Capital increase its claim against FTX?

The requested compensation rose from $120 million to $1.53 billion because additional possessions found within FTX assets were used to pay off 3AC’s financial obligations during the year.

How did the court decide about the modified creditor claim?

The court allowed 3AC’s liquidators to continue their amended lawsuit seeking $1.53 billion even though FTX disputed both the timing and the adequacy of the initial claim.

How will this court decision transform operations within the crypto market?

This decision establishes the need for complete disclosure during bankruptcy proceedings and will probably influence future decisions about crypto-related bankruptcies.

What additional court procedures are currently engaged with FTX?

The legal suits involving FTX include cases to reclaim funds spent through executive-backed sponsorships as well as previous investments by Sam Bankman-Fried in his role as FTX CEO.

What effect will this court decision have on FTX’s ongoing bankruptcy procedures?

This legal decision creates further obstacles for processing FTX’s bankruptcy case because 3AC has launched new court challenges that will likely extend bankruptcy proceedings.

Glossary of Key Terms

Amended Proof of Claim: Bankrupt parties use Amended Proof of Claim (POC) to alter their original bankruptcy claims.
Liquidators: During bankruptcy proceedings liquidators serve as professionals who both recover and manage the assets.
Breach of fiduciary duty: Failure to perform duties of trust toward another person becomes known as breach of fiduciary duty especially when handling financial affairs.