FTX’s bankruptcy estate is pushing back against a $1.5 billion claim from Three Arrows Capital, arguing the failed hedge fund is trying to recover losses from its risky bets.
In a 94-page objection filed June 20 in the U.S. Bankruptcy Court in Delaware, lawyers for the FTX Recovery Trust asked the judge to fully disallow 3AC’s claim, calling it “illogical and baseless.”
The dispute centers on how much crypto 3AC actually held on FTX when both firms collapsed in mid-to-late 2022. The hedge fund claims its account balance was nearly $1.6 billion, but FTX says the net value was just $284 million, after subtracting $733 million in margin debt.
The filing argues that 3AC has ignored its liabilities and now wants other creditors to cover losses from a heavily leveraged position. “FTX creditors should not be a backstop for 3AC’s failed trades,” the estate wrote.
Most of the $284 million evaporated over two days in June 2022 as crypto prices fell. Of that amount, $222 million was lost to market declines, and another $60 million was withdrawn by 3AC itself. FTX says it only liquidated $82 million, fully allowed under contract terms, and that doing so helped prevent the account from turning negative.
3AC’s claim, which initially stood at $120 million in mid-2023, was expanded to $1.53 billion in November 2024. The hedge fund’s liquidators allege FTX breached its duties and delayed disclosing key information about the liquidations. Chief Judge John Dorsey previously ruled in their favor on discovery issues, but the overall claim remains under review.
FTX says the liquidation was not a seizure of assets but a contractual step that converted volatile crypto into U.S. dollars. That shift, they argue, preserved value for 3AC rather than destroying it.
The estate also disputes how 3AC calculated its numbers, saying the fund relied on inflated balances and ignored offsets. At its peak, 3AC’s balance showed $1.02 billion in crypto, not $1.59 billion, and owed $733 million, not $1.3 billion, according to the objection.
If the judge agrees with FTX, 3AC’s claim would likely be denied entirely or reduced to an unsecured claim, entitling it to only a small recovery. A reply from 3AC is due by July 11, and a court hearing is scheduled for Aug. 12.
