FTX’s legal team has pushed back against a $1.53 billion claim filed by the liquidators of failed hedge fund Three Arrows Capital (3AC), arguing that the massive losses resulted from 3AC’s own reckless and highly leveraged trading strategies.
Filed in the U.S. Bankruptcy Court for the District of Delaware, FTX’s formal objection describes the claim as "illogical and baseless," asserting that the defunct hedge fund is now attempting to shift the burden of its failed bets onto the broader pool of FTX creditors. The response intensifies the already complex legal battle between two of the most high-profile failures in the crypto industry's 2022 crash.
In Friday’s objection, FTX’s lawyers argued that 3AC had speculated aggressively on a market upswing that never materialized. When crypto markets instead turned violently downward in mid-2022, it was 3AC’s trading decisions - not any wrongdoing on FTX’s part - that precipitated its insolvency.
“The Joint Liquidators ask this Court to force other Exchange customers and creditors to foot the bill for 3AC’s failed strategy,” FTX stated in the filing. “That request is based on a false premise that lacks any legal or factual merit. In fact, 3AC is owed nothing.”
This challenge comes after 3AC liquidators expanded their original $120 million claim filed in June 2023 to $1.53 billion by November 2024, citing breach of contract, fiduciary failure, and unjust enrichment. The liquidators allege that FTX liquidated 3AC’s holdings to cover outstanding liabilities during the platform's collapse in 2022, and that the transactions were improperly handled and should be considered avoidable under bankruptcy law.
The Disputed Numbers: $1.53 Billion or $284 Million?
Central to the dispute is how 3AC calculated its losses and whether those figures accurately reflect its account balances and real damages. FTX contends that 3AC misrepresented both the value and timing of its holdings.
According to FTX, the claim’s core is based on a snapshot from June 12, 2022, when 3AC allegedly had $1.59 billion in crypto and a $1.3 billion negative fiat balance. FTX contests these numbers, asserting that the actual crypto balance was only $1.02 billion and that the fiat liabilities were far lower at $733 million.
Furthermore, FTX argues that 3AC’s available balance at the time of liquidation was just $284 million, and that any changes in valuation afterward were largely the result of continued price crashes and $60 million in voluntary withdrawals made by 3AC itself.
FTX also claims that only $82 million worth of 3AC's crypto was liquidated, and that this liquidation was done in accordance with margin and credit agreements to ensure account compliance - not to enrich FTX. The filing insists that this action actually preserved 3AC’s remaining account value.
“Notably, the $82 million liquidation benefited 3AC by preserving the value of the 3AC Accounts. Through the liquidation, 3AC exited deteriorating positions in digital assets in favor of stable positions in fiat currency,” the filing states. FTX further emphasized that the liquidated amount was credited to 3AC’s fiat account, mitigating the impact of continued market declines that followed the initial liquidation.
3AC Claims Delayed Disclosure, Legal Rights
In earlier filings, 3AC’s liquidators claimed that FTX had delayed disclosing key information about the account status and liquidation activity. They argued that if this information had been disclosed earlier, it might have altered 3AC’s exposure or allowed the hedge fund to mitigate its losses more effectively. Chief Judge John Dorsey agreed in part, granting 3AC the right to pursue its expanded claim in March 2025.
However, FTX’s latest objection now throws the legitimacy of that claim back into question, setting up a potential courtroom showdown over who should bear responsibility for the billions lost in the crypto market meltdown. 3AC has until July 11 to respond to FTX’s objection. A non-evidentiary hearing is scheduled for August 12 before Chief Judge Karen Owens in the Delaware Bankruptcy Court.
The $1.53 billion claim against FTX isn’t the only legal action 3AC’s liquidators are pursuing. The fund has also filed a $1.3 billion claim in the ongoing bankruptcy of Terraform Labs, the company behind the failed TerraUSD stablecoin and LUNA token. The collapse of Terra in May 2022 was one of the first major triggers in the cascading crypto crisis that year.
These legal actions form part of a broader effort by 3AC’s liquidators to recoup billions in losses and satisfy creditor demands. Still, critics say the fund is using the legal system to rewrite history and absolve itself of the leverage-driven risk-taking that led to its downfall.
FTX’s Own Recovery Efforts Continue
While defending itself from massive claims like that of 3AC, FTX is simultaneously attempting to recover funds from its own collapsed empire. Since filing for Chapter 11 bankruptcy in November 2022, the exchange has launched a series of lawsuits to claw back assets from former executives, affiliates, and entities that received questionable payments prior to the exchange's collapse.
So far, FTX has recovered several billion dollars in assets and intends to begin repaying creditors as early as late 2025, depending on the outcomes of ongoing claims and asset liquidations. The exchange’s bankruptcy administrators have also sold off various non-core assets, including stakes in startups, real estate holdings, and even pieces of the failed FTX Ventures portfolio.
If FTX were to honor the full $1.53 billion claim from 3AC, it would significantly impact the pool of funds available for distribution to other FTX creditors. Legal experts suggest that such claims could reduce recovery percentages across the board and set a precedent for other collapsed entities to claim losses they arguably incurred through self-inflicted mismanagement.
"This isn’t just about 3AC versus FTX," said bankruptcy lawyer Rachel Kim. "It’s about whether debtors and liquidators can retroactively assign blame for trading decisions that blew up in a market crash and then seek restitution from unrelated parties."
A Precedent-Setting Battle Ahead
The outcome of this legal dispute could set a powerful precedent in crypto bankruptcy cases. It may determine whether exchanges or counterparties can be held responsible for the investment decisions of institutional clients - or whether those clients must bear the consequences of their own leverage and risk management failures.
As the case heads toward the August hearing, the crypto industry will be closely watching how the court navigates the complex financial entanglements left in the wake of crypto’s most volatile year on record.