The United States Bankruptcy Court for the District of Delaware granted a motion allowing the joint liquidators of Three Arrows Capital (3AC) to amend their original proof of claim in the FTX bankruptcy proceedings. This increases their claims from $120 million to $1.53 billion.
The amended filing broadened 3AC’s allegations against FTX to include breach of contract, breach of fiduciary duty, unjust enrichment, and proprietary restitutionary claims.
3AC’s Liquidators Secure Major Victory in FTX Case
The ruling stems from a motion filed by 3AC’s liquidators, Russell Crumpler and Christopher Farmer. For context, the liquidators initially filed their proof of claim in June 2023.
It sought to recover funds related to preference, conversion, and other avoidance actions tied to a $120 million loan allegedly owed by 3AC to FTX. Nonetheless, after further investigation, the liquidators determined that 3AC’s dealings with FTX were far more extensive.
“The information obtained by the Liquidators in the year since they filed their Original POC led them to the new conclusion that just two weeks before the commencement of the 3AC Liquidation, the $1.53 billion of assets that 3AC had on the FTX platform were liquidated to satisfy $1.3 billion in liabilities to FTX,” the document read.
Furthermore, according to court documents, the liquidators faced substantial obstacles during their investigation. This included a lack of proper records from 3AC. In addition, the cooperation was minimal from the company’s founders, Kyle Davies and Su Zhu.
Delays in receiving critical documents and data compounded these challenges. Much of the key information was only made available in late 2023 and early 2024. This came after FTX itself had filed for bankruptcy in November 2022. The exchange collapsed amid allegations of fraud and mismanagement under former CEO Sam Bankman-Fried.
This delay prevented the liquidators from fully understanding the scope of 3AC’s transactions with FTX until after the original claims deadline had passed.
“The evidence makes clear that the description of the facts contained in the Original POC was based on the limited information that the Liquidators had available to them at that time,” Judge John T. Dorsey wrote.
Meanwhile, FTX objected to the motion. They argued that the amendment was filed too late and expanded the scope of the claims, violating the bankruptcy process. The debtors claimed that the original proof of claim did not provide sufficient notice of the nature or the amount of the newly proposed claims.
However, the court dismissed FTX’s objections, siding with 3AC’s liquidators and approving the expanded claim. Additionally, the court found that much of the delay in filing the amended claim was attributable to FTX’s failure to provide the necessary documents to the liquidators promptly.
“Having considered all the evidence presented, I find that the balance of the equities is in favor of allowing the Amended POC,” Judge Dorsey noted.
This latest development occurs alongside Bankman-Fried’s ongoing efforts to secure a pardon from President Donald Trump. To strengthen his case, Bankman-Fried has sought to align himself with right-wing figures.
He recently appeared on Tucker Carlson’s show and has reportedly consulted with a lawyer linked to Trump. Despite Trump’s history of pardons, skepticism remains due to SBF’s lack of support in the crypto community.
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