Three Arrows Capital Wins Court Battle to Boost FTX Claim to $1.53 Billion

The legal battle surrounding FTX’s bankruptcy has escalated as a U.S. bankruptcy court authorized liquidators of Three Arrows Capital (3AC) to raise their claim against the collapsed cryptocurrency exchange to $1.53 billion. 

This decision marks a significant development in 3AC’s efforts to recover funds it held on FTX before its downfall.

Court Ruling Favors Three Arrows Capital Liquidators

Chief Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware issued the ruling on March 13, rejecting FTX debtors’ objections that the amended proof of claim (POC) was untimely and an attempt to delay the bankruptcy proceedings.

Dorsey pointed to FTX’s failure to provide key records in a timely manner as a major cause of the delay. He noted that Three Arrows Capital’s liquidators had been diligent in seeking the necessary information and promptly amended their claim once they obtained the data.

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“The evidence suggests that the delay in filing the Amended Proof of Claim was, in large part, caused by the Debtors themselves,” Dorsey stated. “The liquidators were diligent in attempting to obtain the information, and despite having complete information in their possession, the debtors repeatedly delayed giving it to them.”

A Highly Complex Case

Three Arrows Capital liquidators initially filed a $120 million claim in FTX’s bankruptcy case in June 2023. However, further analysis uncovered that FTX had liquidated $1.53 billion in 3AC assets to cover $1.33 billion in liabilities in 2022.

The liquidators argue that these transactions were avoidable and harmed 3AC’s creditors. Their expanded claim includes allegations of breach of contract, unjust enrichment, and breach of fiduciary duty.

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FTX debtors opposed the amended claim, asserting that the original POC lacked sufficient detail to support such a substantial increase and that the amendment came too late. Despite these objections, the court sided with Three Arrows Capital liquidators, emphasizing that the evidence justified the claim expansion.

Three Arrows Capital Collapse

Once a major player in the cryptocurrency hedge fund sector with over $3 billion in assets, Three Arrows Capital collapsed in June 2022 amid a severe market downturn. The fund’s failure triggered widespread legal disputes and liquidation proceedings.

Beyond its claim against FTX, 3AC’s liquidators have also pursued legal action against other collapsed crypto firms, including a $1.3 billion claim in Terraform Labs’ bankruptcy case.

Meanwhile, FTX has been engaged in its own recovery efforts. In November 2024, the exchange filed multiple lawsuits, including claims against SkyBridge Capital and its founder, Anthony Scaramucci, as well as Waves founder Aleksandr Ivanov, seeking to recover funds lost before its collapse.

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The intensifying legal battles surrounding both FTX and Three Arrows Capital highlight the volatility and regulatory challenges within the cryptocurrency industry. The court’s ruling in favor of 3AC liquidators sets a significant precedent for handling bankruptcy claims and creditor disputes in the rapidly evolving crypto space. 

With both sides gearing up for further litigation, the case is likely to remain a focal point in the industry’s legal landscape.