In the FTX vs Three Arrows Capital legal saga, lawyers for bankrupt crypto exchange FTX have fired back against a massive $1.53 billion claim submitted by the defunct hedge fund. In new filings submitted to the Delaware Bankruptcy Court, FTX described the claim as “unreasonable,” “illogical,” and “unsupportable by facts or law.”
This courtroom clash comes as FTX seeks to protect remaining estate assets for its creditors, while Three Arrows Capital (3AC) aims to extract value from one of crypto’s largest insolvencies. The dispute has now become a focal point in the wider web of unresolved post-2022 crypto collapse claims.
FTX vs Three Arrows Capital: Where the Case Stands
Originally filed for $120 million in mid-2023, the 3AC claim ballooned to a staggering $1.53 billion by late 2024. The hedge fund alleges that FTX improperly liquidated its positions shortly before declaring its own bankruptcy. But according to the latest rebuttal from the FTX estate, the claim is built on a “false narrative” and exaggerated figures.
In the FTX vs Three Arrows Capital motion, FTX attorneys stated that 3AC breached its margin terms, ignored liquidation warnings, and withdrew approximately $60 million in ETH before the platform collapsed.
The FTX estate calculated the actual account value to be just $284 million at the time of collapse, including outstanding liabilities. Of that, only $82 million was liquidated, an action that, FTX says, was within its contractual rights.
Liquidation Timeline and Claims Under Fire
Court documents reveal that FTX triggered its risk protocols and began liquidating 3AC’s positions in early June 2022, about five months before FTX’s bankruptcy. The firm claims this action prevented further losses and that 3AC’s collapse was primarily self-inflicted due to excessive leverage and irresponsible risk management.
“3AC failed to manage its account responsibly, ignored repeated margin calls, and voluntarily withdrew substantial assets just days before bankruptcy,” the filing reads.
The FTX vs Three Arrows Capital legal dispute also highlights broader issues surrounding intercompany exposure, cross-claims, and cascading insolvencies in the post-2022 crypto ecosystem.
Key Court Dates and Legal Implications
Judge John Dorsey previously allowed 3AC to amend its claim on procedural grounds despite missing the bar date. However, this does not indicate a ruling on the claim’s merit.
FTX has requested the court dismiss the bulk of 3AC’s claim. A non-evidentiary hearing is scheduled for August 12, 2025, and Three Arrows Capital has until July 11 to formally respond.
Legal observers suggest that a court rejection of the inflated claim could set a precedent for future FTX vs Three Arrows Capital-type cases involving conflicting bankruptcies and late-stage revaluation attempts.
What’s at Stake in FTX vs Three Arrows Capital?
For FTX’s estate and its millions of affected creditors, the outcome could impact future recoveries and estate distributions. If the court disallows most of 3AC’s claim, it could preserve over $1 billion for legitimate claimants.
On the flip side, if 3AC’s arguments succeed, it could recover a significant portion of the alleged loss, adding further pressure on FTX’s already fragmented asset pool.
The FTX vs Three Arrows Capital drama is not an isolated case. It’s one of several tangled legal battles emerging from the 2022 crypto collapse, which also saw Celsius, Voyager, BlockFi, and Terraform Labs enter legal and financial disarray.
Why This Case Matters to the Crypto Industry
Beyond the numbers, the FTX vs Three Arrows Capital case reflects the fragile architecture of interconnected DeFi and CeFi platforms. It underscores the risks of margin-based trading, opaque cross-lending, and the domino effect of insolvency among large players.
A strong court ruling in favor of FTX could reinforce standards for accountability and improve clarity around liquidation rights. It would also discourage inflated claims that could otherwise drain estates meant for retail recovery.
Short Summary
The legal clash between FTX and Three Arrows Capital (3AC) has intensified, with FTX rejecting 3AC’s $1.53 billion claim as baseless. Court filings allege 3AC breached margin calls, mismanaged funds, and withdrew assets before the collapse.
FTX argues only $284 million in value existed, and just $82 million was rightfully liquidated. With a key hearing set for August 12, the case could set legal precedent for crypto bankruptcies and impact the distribution of FTX estate funds to real creditors.
FAQs
Why is Three Arrows Capital claiming $1.53 billion from FTX?
3AC alleges FTX wrongfully liquidated its account and inflated losses, but FTX disputes the math and timeline.
What is FTX’s counterargument?
FTX says it followed margin agreements, and 3AC’s real losses were self-inflicted through poor risk management.
When will this be resolved?
A hearing is set for August 12, 2025. 3AC must respond by July 11.
Glossary of Key Terms
Liquidation: Forced sale of assets to meet margin requirements or cover losses.
Bar Date: The Deadline to file claims in a bankruptcy case.
Margin Call: A demand for additional funds when account equity falls below a set threshold.
Insolvency: A state where liabilities exceed assets and the entity can no longer meet its obligations.
Sources and References
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