Liquidators for Three Arrows Capital (3AC) Seeks to Revise Claims against FTX from $120M to $1.53B

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As a seasoned analyst with years of experience navigating the volatile and dynamic world of cryptocurrencies, I find myself intrigued by the latest developments between FTX, Alameda Research, Three Arrows Capital (3AC), and their respective creditors. The increasing claims and counterclaims, particularly the 3AC liquidators’ request to claw back $1.53 billion from FTX, are reminiscent of a complex chess game where every move counts.

In the process of distributing approximately $16 billion in assets from defunct crypto exchange FTX and its related firm Alameda Research, liquidators for Three Arrows Capital (3AC) are working to recover additional funds. As stated by Bloomberg, 3AC’s liquidators, Russell Crumpler and Christopher Farmer of Teneo BVI, have expanded their bankruptcy claims against FTX to $1.53 billion from the initial $120 million.

3AC’s liquidators claim that the exchange prematurely liquidated, sold or transferred their assets only two weeks following its downfall, a situation caused by the collapse of Terra Luna. Importantly, FTX took $1.33 billion from 3AC’s resources to repay a loan’s collateral, an action that the liquidators consider unjust and potentially preventable.

3AC’s appointed representatives pointed out that FTX failed to adhere to the terms of their contract and trust agreement, implying the transaction should be declared null and void. In response, FTX argued that a yet-unidentified representative from 3AC confirmed the liquidation of the collateral assets.

On November 20th, the case brought forward by the liquidators of 3AC will be listened to in court. The reps from both involved firms are expected to appear at that time.

Cash Distress at Three Arrows Capital

Previously reported by Coinspeaker, Three Arrows Capital currently owes creditors over $3.5 billion, a significant portion of which was lost following the early-2022 crash of Terra Luna IST. In August, the appointed liquidators for 3AC filed a claim worth approximately $1.3 billion against struggling Terra Luna.

Additionally, according to Russell Crumpler and Christopher Farmer, Terra Luna is alleged to have given misleading financial details, particularly concerning its algorithmic stablecoin, which has yet to regain its original value.

3AC’s creditor group has been considering seizing and selling off the assets belonging to the hedge fund’s co-founders. These assets would then be distributed among the investors who have been affected. Additionally, it was reported that the 3AC co-founders failed to share essential information with their creditors before making their investments.

In the previous year, a court in the British Virgin Islands mandated the confiscation of assets linked to the founders of 3AC, which includes Su Zhu. Notably, Su Zhu had served a three-month prison sentence.

Bigger Picture

After the 2021 cryptocurrency market boom, the failure of multiple crypto companies served as a learning experience for various international regulatory bodies regarding the future development of the innovative web3 sector. In response, many Web3 companies have chosen to comply with established regulations to facilitate a smooth transition into mainstream acceptance.

For instance, DeFi projects aimed at the European maker have to ensure the Markets in Crypto-Assets (MiCA) regulations are adhered to strictly. All DeFi protocols have to navigate through the complex regulatory frameworks in different jurisdictions to avoid closure.

Nonetheless, the Web3 space still presents several risks, including sophisticated attacks. For instance, WazirX users are still counting losses after the company was hacked and more than $230 million stolen.

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2024-11-14 17:42