Significant Court Ruling in the FTX Bankruptcy Case
The Delaware bankruptcy court has made a pivotal decision regarding the ongoing fallout from the collapse of Sam Bankman-Fried’s crypto empire. On Thursday, the court approved a petition from Three Arrows Capital (3AC) that dramatically escalates its claim against the FTX estate from a mere $120 million to an astonishing $1.53 billion.
The Rise and Fall of Three Arrows Capital
Three Arrows Capital, once a powerhouse in the cryptocurrency hedge fund sector with reported net assets exceeding $3 billion, faced a catastrophic collapse in 2022. The firm had substantial financial connections to FTX, the exchange that would soon face its own downfall. In July 2023, 3AC filed an initial proof of claim for $120 million, joining the ranks of numerous users and investors who suffered losses due to FTX’s sudden insolvency.
New Evidence Sparks Claim Expansion
In November 2024, the liquidators for 3AC submitted an amended claim after uncovering crucial evidence indicating that FTX had liquidated $1.53 billion worth of 3AC assets just two weeks before the hedge fund initiated its own liquidation proceedings. This liquidation was allegedly executed to cover a $1.3 billion liability owed to FTX, which 3AC contended was not adequately substantiated.
Court Rules in Favor of 3AC
FTX had argued that the $1.3 billion liability represented collateral for a loan made to 3AC, but the court ultimately sided with 3AC. The ruling found insufficient evidence to support FTX’s claims regarding the alleged loan, allowing 3AC to pursue a much larger share of FTX’s remaining assets. This development has the potential to significantly alter how creditor payouts are structured.
Impact on FTX’s Creditor Distribution
FTX, which began distributing funds to its creditors in February 2025, expressed concerns that the enlargement of 3AC’s claim should have been presented earlier. They argued that it could complicate the reorganization plan and impose a burden on other creditors. However, the court justified 3AC’s delay, noting that the liquidators only fully realized the extent of their claim in mid-2024 due to FTX’s missing financial records and a lack of cooperation from 3AC founders Zhu Su and Kyle Davies.
The Aftermath of 3AC’s Collapse
Founded in 2012, 3AC had become a key player in the cryptocurrency market by 2022, and its collapse was one of the initial triggers for the broader crypto market downturn that eventually exposed fraud within Sam Bankman-Fried’s operations. Currently, Bankman-Fried is appealing his criminal conviction and 25-year prison sentence. Meanwhile, Su was detained in Singapore and sentenced to four months for failing to cooperate with liquidators, while Davies has not faced any charges related to the hedge fund’s collapse.
Brief Resurgence and Continued Challenges
In 2023, the founders of 3AC attempted a comeback by launching a crypto exchange called OPNX, aimed at allowing users to trade bankruptcy claims of failed crypto companies. However, this venture was short-lived, shutting down in February.
Questions Arise Over Future Distributions
With the court’s recent decision, 3AC’s liquidators now hold a much stronger position in the FTX bankruptcy proceedings. This development raises pressing questions about how the expanded claim will affect distributions to other creditors. Moreover, the ruling highlights ongoing issues of transparency at both FTX and 3AC, complicating efforts to unravel the tangled web of assets and liabilities between the two firms.
