Three Arrows Capital (3AC) Claims Surge to $1.53 Billion in FTX Bankruptcy Case

The United States Bankruptcy Court for the District of Delaware has approved a motion allowing Three Arrows Capital (3AC)'s joint liquidators to revise their initial proof of claim in the ongoing FTX bankruptcy case. The revised claim has increased dramatically, now totaling $1.53 billion, up from the original $120 million.

This amendment broadens the allegations against FTX, including breach of contract, breach of fiduciary duty, unjust enrichment, and proprietary restitutionary claims.

Significant Win for 3AC’s Liquidators in FTX Proceedings

The court's decision follows a motion filed by 3AC’s liquidators, Russell Crumpler and Christopher Farmer. They initially submitted their proof of claim in June 2023, seeking to recover funds associated with preference, conversion, and other avoidance actions relevant to a $120 million loan reportedly owed by 3AC to FTX. Upon further investigation, the liquidators discovered that 3AC's interactions with FTX were extensive.

“The information obtained by the Liquidators in the year since they filed their Original POC led them to the new conclusion that just two weeks before the commencement of the 3AC Liquidation, the $1.53 billion of assets that 3AC had on the FTX platform were liquidated to satisfy $1.3 billion in liabilities to FTX,” the document stated.

Additionally, court documents reveal that the liquidators faced considerable challenges during their investigation, including insufficient records from 3AC and limited cooperation from the company’s founders, Kyle Davies and Su Zhu.

Delays in obtaining crucial documents compounded these difficulties, with significant information only becoming accessible in late 2023 and early 2024, after FTX had filed for bankruptcy in November 2022. This exchange's downfall was amid allegations of fraud and mismanagement under former CEO Sam Bankman-Fried.

This delay hindered the liquidators from fully grasping the scope of 3AC's transactions with FTX before the original claims deadline.

“The evidence makes clear that the description of the facts in the Original POC was based on the limited information available at that time,” Judge John T. Dorsey remarked.

FTX contested the motion, arguing that the amendment was submitted too late and that it unnecessarily broadened the claims, breaching the bankruptcy process. They asserted that the original proof of claim did not adequately notify them of the nature or amount of the proposed new claims.

Nevertheless, the court rejected FTX's objections, supporting 3AC's liquidators and endorsing the revised claim expeditiously. The court also attributed much of the delay in filing the amended claim to FTX's failure to timely provide necessary documents to the liquidators.

“Having considered all the evidence presented, I find that the balance of the equities is in favor of allowing the Amended POC,” Judge Dorsey stated.

This recent development occurs alongside Sam Bankman-Fried's ongoing endeavors to seek a pardon from President Donald Trump. In an effort to bolster his case, Bankman-Fried has made attempts to align with prominent right-wing figures.

He was recently featured on Tucker Carlson’s show and is reported to have consulted with a lawyer associated with Trump. Despite Trump’s history of offering pardons, skepticism remains with Bankman-Fried due to scarce support from the crypto community.