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- A U.S. court allowed 3AC to raise its FTX claim to $1.53B, rejecting FTX’s objections as insufficient.
- FTX’s bankruptcy estate argued the claim increase was excessive and could delay creditor repayments.
- The ruling strengthens 3AC’s legal position and may force FTX to adjust its repayment and recovery plans.
A US bankruptcy court has sided with 3AC and allowed the failed hedge fund to up their claim against FTX to $1.53 billion after initially claiming $120 million. The court dismissed FTX’s arguments by saying that 3AC had filed for the claim on time. It also dismissed most of the delay as having been caused by FTX’s lack of production of pertinent documents.
Source: Court Order
3AC’s Claim Adjustments
Moreover, 3AC initially filed its claim in June 2023 seeking almost twice the amount but reduced it later. Its liquidators claimed that FTX caused their losses and were seeking for damages under the law for breach of contract, unjust enrichment, breach of fiduciary duty, restitution, and other reliefs. They further argued that FTX deepened 3AC’s problems, which supported the expansion of the claim.
However, FTX’s bankruptcy estate contended that the increase was exorbitant and unreasonable. It claimed that the late-stage adjustment would distort the company’s restructuring and bring inconvenience to the repayment schedule. Since platform has been distributing the fund to creditors, the estate said that entertaining the approved claim might slow down or decrease the amount of funds to other creditors.
FTX Faces Repayment Challenges
Despite such considerations, in relation to the claim expansion, the court held that platform has neglected to present sufficient material to prevent it. The increase for the claims was indicated by 3AC, in the first petition that it had filed, showing that more claims could be filed and thus cannot be deemed as unfair. This ruling strengthened also last week 3AC case on the legal rights over the remaining FTX’s assets.
With this decision, 3AC has a substantially greater share in the remaining funds owned and controlled by FTX. Such a decision may require FTX to adjust its bankruptcy repayment plan and recovery strategy. With an implication on a delayed recovery for creditors. Following such unapportioned fines, investors and stakeholder are left in the dark in waiting for the following events of the case.
Three Arrows Capital was once the most recognized firms operating in the crypto hedge fund industry. It was run by Su Zhu and Kyle Davies and was handling billions of dollars in assets. Nevertheless, it filed for bankruptcy in 2022 due to the crash of Terra-Luna that led to huge financial losses. Further findings showed that the firm had poor risk management practices that were the cause of its demise.
