FTX's lawyer claims that 3AC's $1.5 billion claim is "illogical" and should be dismissed.

Gate News bot message, three months ago, a judge in the Delaware bankruptcy court allowed the defunct trading company Three Arrows Capital (3AC) to increase its claim amount against FTX's bankruptcy assets from $120 million to $1.5 billion. However, FTX's lawyers argued last Friday that the trading company's claim should be "completely dismissed," stating that 3AC's losses were self-inflicted.

3AC increased its claim amount from $120 million to $1.5 billion in November 2024, claiming to have discovered new evidence that FTX liquidated $1.5 billion of assets two weeks before 3AC's own liquidation proceedings were initiated. However, FTX's lawyers stated that the claim is based on "unreasonable and unsound premises, inaccurate figures, and a blind disregard for the actual events that occurred."

FTX believes that 3AC's large-scale spot and margin trading (part of the funds came from the $120 million credit line provided by FTX) led to the company's collapse, which is unrelated to any actions of FTX Asset Management. Although FTX acknowledges a forced liquidation of $82 million, the lawyers argue that this is a contractual obligation stipulated by the credit and margin agreements.

Objections pointed out that 3AC violated its agreement with FTX in June 2022. The month prior, the collapse of Terra led to a price crash across the entire cryptocurrency ecosystem, at which point 3AC's account balance fell below the required level of $240 million. When FTX reached out to 3AC regarding the violation, "3AC ignored FTX's response for more than six hours and actually withdrew $18 million worth of ETH instead of depositing assets," the lawyer (emphasis in the original) cited internal Slack and Telegram logs.

FTX subsequently liquidated the account and sold the related assets for $82 million. Lawyers stated that this move preserved the value of 3AC's assets rather than devaluing them. Because without the liquidation, as of the date FTX filed for bankruptcy, the net assets of these accounts would have reached $18 million. The documents state: "FTX's actions did not result in any loss of value, therefore, the claim that 3AC is entitled to make a claim against FTX is purely fictional."

The supportive statement includes a forensic reconstruction by Steven P. Coverick, Managing Director at Alvarez & Marsal, who stated that the liquidation was "reasonable and necessary" to avoid a negative balance within hours; as well as the opinion of KC Stephen Atherton from the British Virgin Islands, who believes that 3AC's legal theory in the British Virgin Islands does not hold up legally.

The lawyer wrote: "[3AC attempted] to extract value from the debtor's assets at the expense of the legitimate creditors' interests in order to save its own failed liquidation process. But FTX's creditors should not and cannot be the backing for 3AC's failed trading strategies."

The deadline for 3AC's response is July 11, and a non-evidentiary hearing is currently scheduled for August 12.

Source: The Block