Bankrupt crypto change FTX has mentioned it mustn’t must pay an enormous $1.53 billion restoration declare by Three Arrows Capital, arguing in a latest courtroom submitting that the crypto hedge fund’s “personal dangerous [trading] technique triggered its collapse, and its personal account exercise — not any motion by [FTX] — resulted in a big decline within the “worth” related to the 3AC Accounts in June 2022.”
“3AC guess huge that cryptocurrency costs would enhance utilizing money it didn’t have and, when costs as an alternative plummeted, 3AC proceeded to liquidate the dangerous bets it had positioned and withdraw belongings from [FTX],” FTX’s legal professionals wrote within the submitting.
The Delaware courtroom overseeing FTX’s chapter gave 3AC’s liquidators permission to expand their claim earlier this yr, bumping it up considerably from their authentic declare of $120 million. This got here after 3AC’s legal professionals allegedly found new proof suggesting that FTX had liquidated $1.53 billion of 3AC’s belongings two weeks earlier than the hedge fund began its personal liquidation proceedings in June 2022. FTX’s legal professionals say the liquidation of 3AC’s belongings on its platform was carried out to fulfill a mortgage to FTX — however 3AC’s legal professionals pushed again, arguing that the mortgage to FTX wasn’t sufficiently documented or in any other case substantiated. The chapter courtroom sided with 3AC, discovering inadequate proof to assist FTX’s declare of a mortgage.
In the latest submitting, legal professionals for FTX’s property mentioned that on June 12, 2022 the precise worth of belongings in 3AC’s accounts was solely $284 million — $1.017 billion in digital belongings and damaging $733 million in US {dollars}. Additionally they added that the “first and solely” liquidation of 3AC’s belongings ordered by FTX was on June 14, 2022, and swapped $82 million in crypto for money — a transfer they argued “truly benefitted 3AC (not FTX).”
“The Joint Liquidators grossly inflate the precise $284 million worth of belongings related to the 3AC Accounts on June 12, 2022 by greater than $1.2 billion, and so they ignore that all the loss in account worth resulted from market worth declines and 3AC’s personal withdrawals, not any motion taken by FTX,” the bankrupt change’s legal professionals wrote.
“The Joint Liquidators ask this Court docket to pressure different Change prospects and collectors to foot the invoice for 3AC’s failed technique by asserting illogical and baseless claims for $1.53 billion…
[T]his is a false premise that lacks any authorized or factual advantage, and, in truth, 3AC is owed nothing,” the legal professionals added.
FTX, which was at one time one of many largest crypto exchanges on the earth, filed for bankruptcy protection shortly after its collapse in November 2022. The change’s restoration belief began distributing $5 billion to FTX creditors in May.
3AC collapsed in June 2022, one month after the collapse of the Terra/LUNA ecosystem, beginning a domino-like collapse of main crypto firms together with Voyager, Celsius, BlockFi and Genesis.
3AC has till July 11 to file an objection earlier than the listening to set for August 12.