The legal team representing FTX has vehemently countered the enormous $1.5 billion claim filed by defunct trading company Three Arrows Capital (3AC). This comes three months after a Delaware bankruptcy court sanctioned 3AC to augment its claim against the FTX bankruptcy estate from an initial $120 million to a staggering $1.5 billion.
In November 2024, 3AC inflated its claim to $1.5 billion, alleging newfound evidence proving that FTX had liquidated $1.5 billion of 3AC’s assets two weeks prior to 3AC’s own liquidation. However, FTX’s lawyers contend this claim is rooted in an “unfounded and indefensible starting assumption, incorrect calculations, and ignorance of the actual unfolding of events.”
3AC’s downfall, according to FTX, was primarily due to its own colossal spot and margin trading, partially financed by a $120 million credit line from FTX. Despite acknowledging an $82 million forced liquidation, FTX’s lawyers argue it was a contractual obligation under the credit and margin terms.
The legal rebuttal describes a scenario in June 2022 where 3AC violated its contracts with FTX following the Terra collapse, which triggered a widespread plummet in crypto prices. This resulted in 3AC’s account balance dipping below the required $240 million. Instead of replenishing the assets, 3AC allegedly withdrew $18 million in ETH, ignoring FTX’s communications for over six hours.
FTX responded by liquidating the account, converting assets into $82 million. The lawyers argue this action preserved 3AC’s asset value rather than diminishing it. They assert that without the liquidation, the accounts would have been $18 million in deficit by FTX’s petition date.
FTX’s claim that no action on their part led to any loss in value, thus arguing that 3AC’s claim is baseless, is reinforced by supporting documents from Alvarez & Marsal managing director Steven P. Coverick and British Virgin Islands KC Stephen Atherton.
The case continues with 3AC’s response due by July 11, and a non-evidentiary hearing is scheduled for August 12.
Disclaimer: This article is for informational purposes only and is not intended as legal, tax, investment, financial, or other advice.
