3AC Sues FTX for $1.5 Billion Over “Unlawful Liquidation”

The liquidators of the defunct hedge fund Three Arrows Capital (3AC) have increased their bankruptcy claim against FTX from $120 million to a massive $1.5 billion. They accuse FTX of unfairly liquidating 3AC’s assets just weeks before the fund’s collapse. FTX, however, argues that a person linked to 3AC authorized the liquidation. With tensions rising, the court will hear the case on November 20.

Here’s a rundown of the details.

3AC Slams FTX – Here’s Why

In a recent court filing in Delaware, 3AC claims that FTX wrongly sold off $1.33 billion worth of assets just weeks before the fund’s collapse. The liquidators argue that these early sales devalued 3AC’s assets and harmed its creditors, as the assets were sold at low prices on the FTX platform.

3AC believes the sales were both “avoidable” and “unfair,” stating that they were done to settle debts and should be reversed. This new claim for $1.5 billion marks a big increase from their original $120 million filing, as 3AC insists its assets were worth much more.

3AC also claims that FTX did not provide the necessary information to properly calculate the losses. The full details only became clear in August, which 3AC argues shows that FTX mishandled the situation.

FTX Responds to 3AC’s Allegations

FTX has responded by pointing out that someone connected to 3AC itself authorized the liquidation, though the person’s identity remains unknown. Perhaps, the court has yet to determine this individual’s role and involvement, but FTX maintains that it was not directly responsible for the liquidation process. 

The court will address 3AC’s request to amend its bankruptcy claim at a hearing on November 20. This could determine the next steps in the case.

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Terraform Labs Feels the Burn

In addition to FTX, 3AC’s liquidators are also pursuing a $1.3 billion claim against Terraform Labs, the company behind TerraUSD (UST) and LUNA. They argue that Terraform misled them about the stability of these assets, leading 3AC to make substantial investments before both assets ultimately crashed. 

Now, 3AC seeks compensation for losses tied to its purchases of UST and LUNA.

The decisions made in these cases will likely have long-lasting effects on the crypto sector.