The dispute between bankrupt FTX and Three Arrows Capital continues in the courtrooms. FTX is challenging the $1.53 billion claim made by 3AC.
Reasons for Challenging Three Arrows Capital's Claim
FTX has officially objected to the claim filed by Three Arrows Capital for $1.53 billion in a Delaware bankruptcy court. Initially, 3AC requested $120 million but later significantly raised the amount, citing new evidence related to asset liquidations carried out by FTX. FTX's lawyers argue that 3AC's major losses were a result of its own risky trading strategies and failure to meet margin requirements on FTX's platform.
Context of the Collapse of Three Arrows Capital
To understand the origins of this conflict, we need to go back to the turbulent market conditions of mid-2022. This period witnessed the collapse of the Terra (LUNA) ecosystem, which triggered a liquidity crisis for many firms, including Three Arrows Capital. In June 2022, following the Terra crash, 3AC's account on the FTX platform fell below the required margin threshold, specifically dropping below $240 million. At that point, FTX reached out to 3AC, requesting that they add funds to meet the margin call, but instead, 3AC reportedly withdrew $18 million in Ethereum, prompting FTX to liquidate 3AC's account.
Perspectives on Further Legal Proceedings
The legal process is ongoing. Following FTX's formal objection, Three Arrows Capital is required to file a response by July 11. This response will likely highlight their arguments and provide the basis for the $1.53 billion figure. A hearing is scheduled for August 12, during which both parties will present their arguments to the judge. The court's decision will significantly impact the total liabilities that must be accounted for in the bankruptcy proceedings.
The dispute between FTX and Three Arrows Capital highlights the complexity and interconnected nature of failures within the crypto industry, as well as the importance of adhering to margin trading regulations. The court's ruling may set a precedent for future bankruptcy cases in the crypto sector.
