Three Arrows Capital (3AC) Expands Its Claim Against FTX Estate to $1.53 Billion, Marking a Major Development

3AC, once a dominant crypto hedge fund with over $3 billion in reported net assets, collapsed in 2022 while it still had deep financial ties to FTX

The Delaware bankruptcy court handling the FTX estate has approved a petition from Three Arrows Capital (3AC) to expand its claim against the estate from $120 million to $1.53 billion, a move that could have major implications for other creditors in the sprawling bankruptcy.

The hedge fund, which collapsed in 2022 with deep financial ties to FTX, initially filed a proof of claim for $120 million. However, 3AC’s liquidators amended their claim in November after discovering evidence that FTX had liquidated $1.53 billion in 3AC’s assets just two weeks before the hedge fund began its own liquidation in May 2021.

In documents filed with the court, 3AC’s liquidators argued that FTX’s liquidation of 3AC’s funds was carried out to satisfy a $1.3 billion liability to FTX, an obligation that 3AC claimed was not sufficiently substantiated.

FTX’s bankruptcy said the $1.3 billion liability represented collateral for a loan FTX made to 3AC, but the court ruled in favor of 3AC, finding insufficient evidence to support FTX’s loan claim.

The ruling allows 3AC to pursue a significantly larger portion of FTX’s remaining assets, potentially reshaping creditor payouts. FTX, which began distributing funds to creditors in February, said the expanded claim should have come sooner.

The court, however, determined that 3AC’s delay was justified, given that the liquidators only uncovered the full extent of their claim in mid-2024 due to missing financial records from FTX and a lack of cooperation from 3AC’s founders, Zhu Su and Kyle Davies.

3AC, founded in 2012, had grown into one of the most influential financial firms in the cryptocurrency industry by 2022. Its collapse was among the first and largest dominoes to fall before the broader crypto market imploded in 2022, which ultimately set off the chain of events that revealed fraud in Sam Bankman-Fried’s crypto empire.

Bankman-Fried is currently pursuing an appeal of his criminal conviction and 25-year prison sentence. Following the collapse of 3AC, Su was detained in Singapore and sentenced to four months in prison for failing to cooperate with 3AC’s liquidators. Davies did not face any charges connected to the hedge fund’s collapse.

The 3AC founders reunited in 2023 to launch a short-lived crypto exchange called OPNX — designed to allow users to trade bankruptcy claims of failed crypto companies — which shut down in February.