A Delaware bankruptcy court sided with failed hedge fund Three Arrows Capital (3AC), approving a dramatic increase in its claim against FTX from $120 million to $1.53 billion. The ruling, which comes as FTX continues its bankruptcy process, introduces new complexities for creditor payouts and raises questions about FTX’s handling of funds in its final days.
Court Approves 3AC’s Expanded Claim
The legal dispute involves allegations that FTX liquidated $1.53 billion of 3AC’s assets just two weeks before the hedge fund itself collapsed in 2022. FTX argued that the liquidation was necessary to settle a $1.3 billion loan obligation, but the court reportedly found insufficient evidence to support this claim.
The court’s decision to approve 3AC’s revised claim significantly reshapes how remaining FTX assets may be distributed among creditors. FTX’s estate opposed the claim expansion, arguing that 3AC’s request came too late in the bankruptcy process.
Interesting turn of events. I didn't know this before, but not surprised either as they (FTX/3AC) were "close".I am curious if FTX had anything to do with the LUNA/UST crash/depeg in May 2022? https://t.co/oubjKHvfMC
— CZ ???? BNB (@cz_binance) March 14, 2025
The crypto exchange, which began distributing funds to creditors in early 2025, maintained that the increased claim would unfairly delay and disrupt payouts to other creditors.
However, the court determined that 3AC’s delay was justified due to missing financial records and FTX's lack of transparency, which made it difficult for 3AC’s liquidators to assess their full claim sooner.
A Tumultuous History Between FTX and 3AC
Before both firms collapsed, 3AC and FTX were deeply intertwined within the crypto industry. At its peak, 3AC reportedly managed over $3 billion in net assets and was among the most influential hedge funds in the market.
However, its downfall in mid-2022 marked the beginning of a broader crypto collapse, exposing the financial instability and potential misconduct within Sam Bankman-Fried’s FTX empire.
The bankruptcy court’s ruling is just the latest development in the legal aftermath of the FTX and 3AC failures. Sam Bankman-Fried, the former FTX CEO, is currently appealing his conviction and 25-year prison sentence.
Meanwhile, 3AC co-founder Zhu Su was sentenced to four months in prison in Singapore for failing to cooperate with liquidators, while his partner, Kyle Davies, has avoided legal repercussions related to the hedge fund’s collapse.
The court’s decision allows 3AC to claim a larger share of FTX’s remaining assets, but it also creates new challenges for the already complicated bankruptcy proceedings. Creditors awaiting payouts may now see further delays as legal battles over fund distribution intensify.
This article was written by Jared Kirui at www.financemagnates.com.
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