FTX Recovery Trust Files Objection to 3AC Claim
FTX Recovery Trust, managing the liquidation process of crypto exchange FTX, has filed a formal 94-page objection in the US Delaware bankruptcy court to dismiss a $1.5 billion claim by failed hedge fund Three Arrows Capital (3AC).
The appeal argues that 3AC’s claim is “unrealistic, unsupportable, and based on an erroneous assumption regarding the account balance.” FTX contends that 3AC has overstated its digital asset value.
3AC’s claim relies on FTX allegedly holding about $1.6 billion worth of digital assets at the time of its bankruptcy in November 2022. However, FTX claims that as of June 2022, the account was valued at only $284 million, factoring in more than $733 million in margin debt, according to their statement.
FTX alleges that 3AC ignored its debt burden, trying to present its over-leveraged positions as “clean value.” The filing further claims that most of the $284 million in assets vanished quickly, with $222 million lost in a crypto market crash and $60 million withdrawn by 3AC itself.
FTX stated that it only liquidated one position worth $82 million after 3AC failed to respond to margin calls. They assert this was in line with the contract, preventing a negative account balance.
The petition argues: “FTX creditors should not be insured against 3AC’s failed trades. The hedge fund took risky positions and messed it up. FTX took action as those positions collapsed.”
If the court rules in FTX’s favor, 3AC could have its claim dismissed or substantially reduced to ordinary creditor status, entitling the fund to only a small fraction of its sought amount.
The next hearing is scheduled for August 12.
This is not investment advice.
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