US court approves 3AC bid to expand its $1.5 billion claim against FTX

The US Bankruptcy Court settled the clearer’s 3-arrow capital (3AC) permission to expand its claim against FTX to $1.53 billion, rejecting objections from FTX debtors, denying the move as unfair and unfair.

U.S. Bankruptcy Judge John T. Dorsey on Thursday held that 3AC liquidators provided adequate notice of their claims and were hampered by an investigation by FTX’s failure to share relevant records in a timely manner.

“The evidence suggests that the delay in submitting revised proof of claims was largely caused by the debtor himself,” Dorsey wrote in the decision.

Meanwhile, FTX debtors led by CEO John Ray III opposed the amendment, claiming that they introduced new legal theory and significantly increased the size of the claim.

However, the court found that 3AC’s original filing dismissed the debtor’s objection “by notifying him of the possibility of a claim he later alleged.”

The FTX Debtor’s legal representative did not respond immediately Decrypt’s Request a comment.

3AC was once one of the most important crypto hedge funds with assets of over $3 billion and collapsed in June 2022 after a sharp recession in the crypto market.

Founded by Kyle Davies and Su Zhu, the fund had placed large bets on digital assets, including Terrausd Stablecoin, which lost almost all of its value in May 2022.

The collapse of 3AC has caused a wave of liquidation throughout the crypto industry, affecting lenders such as Voyager Digital and Blockfi.

The fund entered into court order liquidation in the British Virgin Islands in late June 2022.

According to a court application, 3AC had $1.53 billion in assets in FTX as of June 12, 2022. Over the next two days, these assets were liquidated to cover the $1.3 billion liabilities owed to FTX.

The 3AC liquidator first filed a $120 million claim in June 2023 in the FTX bankruptcy case, but later expanded and alleged claims that included breach of contract, unfair enrichment and breach of fiduciary duty.

The ruling comes 15 months after 3AC liquidators secured a global freeze on $1.4 billion in assets associated with the fund’s co-founder.

The December 2023 order issued by the UK Virgin Islands Court blocks Zhu, Davies and Davies’ wife Kelly Chen from accessing funds while claims against them are pursued.

The liquidators argue that the founders should be responsible for allegedly deepening the financial difficulties of 3AC in the weeks before the collapse.