FTX Clashes with Three Arrows Capital Over $1.5 Billion Claim: "Illogical and Baseless," Says FTX

Bankruptcy Estate Fires Back at 3AC's Attempt to Recover Losses

Hang onto your hats, crypto fans—FTX's bankruptcy estate isn't holding back! They're fiercely challenging a whopping $1.5 billion claim from the infamous Three Arrows Capital (3AC). The estate says 3AC is just trying to make up for their risky bets gone wrong. Ouch!

On June 20, in a scorching 94-page objection to the U.S. Bankruptcy Court in Delaware, the lawyers for the FTX Recovery Trust went full throttle. They slammed 3AC's claim as "illogical and baseless" and asked the judge to shut it down completely. No mercy!

This legal slugfest is all about how much crypto 3AC actually had on FTX when both empires crumbled in 2022. 3AC swears their account was nearly $1.6 billion, but FTX is like, "Hold up, it was only $284 million after we took out your $733 million margin debt!" Talk about a reality check.

FTX's filing is pulling no punches. They're accusing 3AC of playing fast and loose with their liabilities and now wanting other creditors to foot the bill for their disastrously leveraged positions. "FTX creditors shouldn't be the safety net for 3AC's failed trades," the estate declared. You tell 'em!

Get this—most of that $284 million went up in smoke over just two days in June 2022 as the crypto market took a nosedive. $222 million vanished into thin air due to market drops, and 3AC themselves yanked out another $60 million. FTX insists they only liquidated $82 million, which was totally within their rights, and it helped keep the account from going negative. Smart moves!

3AC's claim, which started at $120 million in mid-2023, ballooned to a staggering $1.53 billion by November 2024. 3AC's liquidators are claiming FTX dropped the ball and didn't spill the beans on the liquidations fast enough. Chief Judge John Dorsey sided with them on some discovery issues, but the whole claim is still up in the air.

FTX is adamant that the liquidation wasn't some hostile asset grab—it was a contractual move that turned risky crypto into safe U.S. dollars. They argue it actually saved value for 3AC, rather than tanking it. Smooth play!

The estate is also calling out 3AC for how they crunched their numbers. They say 3AC used puffed-up balances and ignored their offsets. At its peak, 3AC's balance was $1.02 billion in crypto, not $1.59 billion, and they owed $733 million, not $1.3 billion, according to the objection. Time for a math lesson, 3AC!

If the judge sides with FTX, 3AC's claim could be tossed out or downgraded to an unsecured claim, leaving them with just a tiny recovery. 3AC has until July 11 to hit back, and the court showdown is set for August 12. Buckle up, this battle's far from over!