Three Arrows Capital gets U.S. bankruptcy court authorization to increase $1.5B claim against FTX

The U.S. bankruptcy court in Delaware authorized Three Arrows Capital liquidators on March 13th to increase their claim against FTX to $1.53B. Judge Dorsey also rejected FTX’s objections, citing the defunct crypto exchange’s failure to share relevant records demanded by 3AC liquidators in a timely manner.

FTX co-founding president Michael Bottjer questioned Three Arrows Capital (3AC)’s request to the Delaware bankruptcy court to increase its claim against FTX from $120M to $1.53B. According to Bottjer, Three Arrows Capital claimed it only recently discovered evidence that FTX liquidated $1.53B of its assets just two weeks before 3AC itself went into liquidation, much more than the $120M originally claimed. 

Three Arrows Capital argued it could not figure this out sooner because FTX was in its own bankruptcy and had key data, and 3AC claims it did not get enough details until after the official claim deadline passed. Judge Dorsey of the U.S. Bankruptcy Court for the District of Delaware ruled on Thursday that 3AC liquidators had provided sufficient notice of their claim and were held back by FTX’s late submission of relevant information.

Three Arrows Capital receives greenlight to increase claims against FTX 

FTX Chapter 11 – 3AC Key Update 🏹🧵

1) What’s happening? Three Arrows Capital (3AC), asked a bankruptcy court to let it increase its claim against FTX from $120 million to $1.53 billion.

— MBottjer (@Mbottjer) March 13, 2025

The U.S. Bankruptcy Court in Delaware granted the liquidators of the defunct hedge fund Three Arrows Capital (3AC) permission to expand their claim against FTX to $1.53 billion and rejected the objections of FTX debtors. 

Louis D’Origny, the CFO of FTX Creditors, pointed out the ruling would also increase the claim pool by 20%, which would be a disaster for customer creditors. He added that significantly lower recoveries were to be expected if 3AC gets the $1.5 billion claim in FTX. D’Origny explained that the money would go to the creditors of Three Arrows Capital, who were in ‘deep water’ but would ‘smash the recovery expectations’ if they got over $1.5 billion. 

However, FTX did not want 3AC to update the claim so late, arguing it was effectively a brand-new claim that should be barred for missing the filing deadline. Nevertheless, Judge Dorsey decided that 3AC’s new information was still related to the same ‘underlying issue’ (FTX’s liquidation of 3AC’s assets). The judge allowed the amendment because FTX had a fair warning of potential bigger claims.

“Bottom line: 3AC can now pursue its full $1.53B claim in FTX’s bankruptcy. The court found 3AC acted in good faith and that FTX wasn’t unfairly blindsided, so the late amendment was approved.”

~ Michael Bottjer 

Russell Crumpler and Christopher Farmer, acting in their capacities as the duly authorized joint liquidators for 3AC’s British Virgin Islands liquidation, requested permission to revise 3AC’s filed proof of claim. The original proof of claim asserted claims for preference, conversion, and other avoidance actions totaling $120 million.

FTX delays the filing of the amended Proof of Claim

Judge Dorsey wrote in the court’s decision that the debtors themselves were in large part responsible for delaying the filing of the amended Proof of Claim. The court found that 3AC’s original filing had put FTX on notice of the possibility of the later asserted claims. The ruling came 15 months after 3AC’s liquidators also secured a worldwide freeze on $1.4 billion in assets tied to the fund’s co-founders, Kyle Davies and Su Zhu.

Meanwhile, FTX’s debtors, led by CEO John Ray III, objected to the amendment. They argued that it introduced new legal theories that massively increased the size of the claims. Bottjer revealed that FTX previously argued that an unnamed person connected to Three Arrows Capital initiated the asset liquidation process.

Bottjer said the amended claim included accusations against FTX of preference, conversion, undervalued transactions, unjust enrichment, breach of trust, and breach of contract. 3AC also complained that FTX’s delay in providing information forced them to dig through millions of raw data points, and only by August 2024 did they confirm the exact amount FTX liquidated. Bottjer declared that the delay added major costs to the process.

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