Three Arrows Capital Seeks to Increase Claim Against FTX
The liquidators for the now-bankrupt crypto hedge fund, Three Arrows Capital (3AC), are making significant moves in their ongoing legal battle with FTX. They are seeking court approval to elevate their claim against FTX from an already substantial $120 million to a remarkable $1.53 billion. This request arises from serious allegations that, just two weeks prior to the collapse of 3AC, FTX took drastic measures by liquidating and seizing $1.33 billion worth of the hedge fund’s assets in order to settle debts. This information was reported by Bloomberg.
Allegations of Unfair Practices
The liquidators argue that these transactions were “avoidable and unfair,” claiming that the unexpected liquidation caused significant harm to 3AC’s creditors. Furthermore, 3AC asserts that FTX not only undervalued the seized assets but also breached trust, contract, and fiduciary obligations, amplifying the severity of their claims. The hedge fund’s representatives contend that FTX withheld crucial information, which forced the liquidators to comb through unprocessed data to assess the total extent of losses that became evident in August.
FTX’s Response
In defense of their actions, FTX has stated that an unidentified person associated with 3AC was responsible for initiating the liquidation process. However, FTX has not yet confirmed the identity of this individual, which leaves some ambiguity in the case. The situation continues to evolve, with the next major court appearance set for November 20, where the Delaware Bankruptcy Court is scheduled to review 3AC’s motion to amend its claim.
Broader Legal Issues for 3AC
This legal battle is just one in a series of claims that 3AC has been pursuing against various collapsed cryptocurrency entities. Earlier in August, 3AC’s liquidators filed a staggering $1.3 billion claim against Terraform Labs, the developer behind the failed TerraUSD (UST) stablecoin and its sister token, Luna (LUNA). The claim alleges that Terraform Labs misled 3AC regarding the stability of its ecosystem, ultimately leading to inflated token valuations and significant losses for 3AC.
FTX’s Bankruptcy Proceedings
Meanwhile, FTX is navigating its own bankruptcy proceedings and has ramped up efforts to recover funds. Recently, the exchange’s bankruptcy estate filed a lawsuit seeking $100 million against SkyBridge Capital and its founder, Anthony Scaramucci, in an attempt to reclaim investments linked to former CEO Sam Bankman-Fried.
Additional Lawsuits Filed by FTX
In related legal developments, FTX is embroiled in lawsuits against Changpeng Zhao, the former CEO of Binance, alleging a fraudulent $1.75 billion repurchase agreement, as well as against Waves founder Aleksandr Ivanov, seeking $90 million in crypto assets. In filings from earlier this week, FTX accused Binance of engaging in fraudulent behavior that adversely affected its financial status and reputation.
Details of the Binance Allegations
The lawsuit claims that Binance, along with Zhao and other executives, received at least $1.76 billion in cryptocurrency through questionable transactions involving a 2021 share purchase agreement between Binance and FTX, which FTX now claims was fraudulent given its insolvency at the time. Furthermore, it is alleged that Bankman-Fried funded this transaction utilizing a mixture of tokens from FTX, namely FTT, along with Binance’s BNB and BUSD, valued at $1.76 billion. Notably, Alameda Research is accused of misusing approximately $1 billion of customer deposits from FTX for this transaction, fully aware of its precarious liquidity position.
Impact on FTX’s Operations
Additionally, FTX has accused Zhao of intentionally undermining the exchange’s operations by disseminating false information. These actions are claimed to have precipitated a bank run that severely hindered FTX’s ability to secure alternative financing, further complicating the exchange’s financial woes.