Three Arrows Capital (3AC) has secured a major legal victory in its case against FTX. A U.S. bankruptcy court has approved the firm’s request to increase its claims in FTX’s bankruptcy proceedings from $120 million to $1.53 billion . This adjustment follows new findings that suggest 3AC had significantly larger dealings with FTX than initially reported. The expanded claim includes allegations of breach of contract, breach of fiduciary duty, and unjust enrichment. The decision was made by the United States Bankruptcy Court for the District of Delaware, which ruled in favor of 3AC’s liquidators, Russell Crumpler and Christopher Farmer. They had initially filed their proof of claim in June 2023, seeking recovery of funds linked to a $120 million loan from FTX. However, after extensive investigations, they uncovered that, shortly before 3AC’s liquidation, FTX had liquidated $1.53 billion in assets belonging to 3AC to cover $1.3 billion in liabilities . Court records indicate that 3AC’s liquidators faced significant challenges in their investigation. Their work was complicated by a lack of proper records from 3AC, minimal cooperation from its founders, Kyle Davies and Su Zhu, and substantial delays in obtaining key documents from FTX. Many crucial pieces of evidence only surfaced in late 2023 and early 2024, long after FTX had filed for bankruptcy in November 2022. FTX strongly opposed 3AC’s request to expand its claim, arguing that the amendment was submitted too late and altered the scope of the bankruptcy process. FTX’s legal team contended that the original claim did not provide adequate notice regarding the new allegations or the total sum being pursued. However, the court rejected these objections, finding that much of the delay was due to FTX’s failure to provide necessary documents to the liquidators. Judge John T. Dorsey ruled in favor of 3AC’s claim expansion, stating that the equities of the case supported allowing the amended proof of claim . In his written decision, Judge Dorsey acknowledged that the liquidators had limited information when they first filed the claim and that new evidence justified the increase. He also noted that 3AC was unable to fully assess its financial dealings with FTX until after the original claims deadline had passed, as FTX had withheld critical data. This ruling marks a major step forward for 3AC as it continues efforts to recover funds lost during the FTX collapse. The now-defunct hedge fund had been one of the largest crypto firms impacted when FTX crumbled amid allegations of fraud and mismanagement under former CEO Sam Bankman-Fried. While FTX’s objections have been dismissed in court, it remains unclear how this ruling will affect the ongoing bankruptcy process and potential creditor repayments. Given the scale of the updated claim, FTX’s remaining assets may now face additional strain as multiple entities seek to recover funds. Meanwhile, Sam Bankman-Fried is actively seeking legal avenues to secure a potential presidential pardon . The former FTX CEO has been making efforts to align himself with right-wing figures in an attempt to appeal to former President Donald Trump. Reports suggest that Bankman-Fried has appeared on conservative media outlets, including an interview with Tucker Carlson , and has consulted with a lawyer known for having connections to Trump. While Trump has issued controversial pardons in the past, skepticism remains over whether he would extend one to Bankman-Fried, given his lack of widespread support within the crypto community. With 3AC’s expanded claim now officially recognized, the next phase of legal proceedings will determine whether FTX creditors will see any additional recoveries. The case continues to unfold, and industry observers are closely watching how these financial and legal battles will shape the future of crypto bankruptcies.
