The liquidators of the now-defunct hedge fund, Three Arrows Capital (3AC), have taken a significant step in their legal proceedings by dramatically increasing their bankruptcy claim against the cryptocurrency exchange FTX. Initially filed at $120 million, the claim has soared to a staggering $1.5 billion. The liquidators accuse FTX of prematurely liquidating 3AC’s assets just weeks before the hedge fund’s collapse, which they argue was both avoidable and unfair. This legal battle is set to be heard in court on November 20, and the outcome could have far-reaching implications for the crypto industry.
3AC Demands $1.53B from FTX
According to a recent court filing in Delaware, 3AC asserts that FTX wrongfully liquidated assets valued at $1.33 billion, contributing significantly to 3AC’s downfall. These assets, they claim, were sold off at a reduced price on the FTX platform, consequently diminishing their value and negatively impacting 3AC’s creditors. The liquidators argue that the actions taken by FTX in liquidating these assets were not only unnecessary but also detrimental.
This substantial mark-up from the original $120 million claim to the current $1.5 billion figure is based on 3AC’s belief that their assets held a much higher value at the time of liquidation. Further exacerbating their grievances, 3AC contends that FTX failed to provide vital information needed to precisely calculate the extent of the losses. This crucial data only surfaced in August, bolstering 3AC’s claims of FTX’s mishandling of the situation.
FTX’s Response to 3AC Claims
FTX, in its response, maintains that the liquidation was authorized by an individual associated with 3AC, although the identity of this person remains undisclosed. This raises questions about the potential involvement of internal parties within 3AC in the liquidation process. Despite these assertions, FTX asserts that it was not directly responsible for the decision to liquidate the assets.
The upcoming court hearing on November 20 will be pivotal in determining whether 3AC’s amended claim will be accepted. The court’s decision could influence future dealings in the cryptocurrency sector, particularly concerning asset liquidation and bankruptcy claims.
3AC Takes Legal Action Against Terraform Labs
In addition to their legal battle with FTX, 3AC’s liquidators have also initiated a $1.3 billion lawsuit against Terraform Labs, the entity behind the TerraUSD (UST) and LUNA cryptocurrencies. They allege that Terraform Labs misled them regarding the stability of these digital assets, prompting 3AC to make considerable investments. Unfortunately, both UST and LUNA experienced dramatic crashes, leading to substantial financial losses for 3AC.
By pursuing this lawsuit, 3AC aims to recover losses associated with their investments in UST and LUNA. The outcomes of these legal confrontations with both FTX and Terraform Labs could establish significant precedents within the crypto community, potentially influencing how similar cases are handled in the future.
As the legal proceedings unfold, the crypto industry is closely watching, aware that these rulings could reshape the landscape of financial responsibility and asset management within the sector.
