The fallen FTX crypto exchange is moving along with their plans to reimburse customers, but not all refund claims have been granted. Three Arrows Capital (3AC), a now-insolvent crypto hedge fund that infamously went down along with Terra Luna back in 2022, has been denied a whopping $1.5 billion claim for FTX-linked financial damage.
Conversely, this legal bid was rejected by FTX due to claims of a different balance during the FTX fiasco in late 2022. According to the original $1.5 billion claim by Three Arrows Capital (3AC), the hedge funds balance hovered around $1.6 billion, while FTX representatives claim that the actual balance was $284 million after deducting the $733 million in margin debt.
FTX Argues 3AC Was A Self-Caused Ruin
Initially, Three Arrows Capitalโs (3AC) co-founder Su Zhu accused FTX & the sister company Alameda Research for manipulating the crypto market, particularly relying on cash & digital assets acquired from lenders to bail them out in high-risk or even irrational decision making.
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However, the defense’s legal team claims this argument is both legally & factually unfounded, therefore the lengthy 94-page objection filing delves into why the judge should completely disallow the $1.5 billion claim. Just a few weeks back, the recovery fund issued $5 billion in creditor reimbursement.
The Recovery Trust alleged that the 3ACโs demise was self-inflicted due to irrational investment decisions, even though co-founding boss Sam Bankman-Fried was convicted after years of similar behavior in the dual Alameda & FTX management. Ultimately, itโs yet to be seen if the court grants FTXโs motion declaring that 3AC has simply ignored its liabilities & seeks creditors to cover hefty losses for unreasonably leveraged positions.
On The Flipside
- Despite the 94-page document stating that โFTX creditors should not be a backstop for 3ACโs failed tradesโ, itโs clear that the crypto exchange’s use of Alameda Research as a gateway for investing into FTX has been a proven manipulation practice.
Why This Matters
The 2022 FTX fiasco caused a multi-billion dollar domino effect on the market, which negatively affected previously successful crypto firms, hedge funds & traders. On the other hand, hedge funds like Three Arrows Capital are notorious for their high-leveraged plays.
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FTX argues that Three Arrows Capitalโs (3AC) $1.5B claim is inflated, saying 3ACโs losses were self-inflicted due to risky trading, not FTXโs fault. Be waryโcourt battles like this are messy and could drag on.
3AC, a collapsed hedge fund, claims its FTX account was worth $1.6B, but the platform says it was only $284M after debts. This dispute stems from 3ACโs 2022 bankruptcy, so approach any related crypto investments with caution.
In March 2025, a bankruptcy court allowed 3AC to expand its claim from $120M to $1.53B, despite the exchange’s objections. FTX now calls this โbaseless,โ making the outcome uncertainโsteer clear of betting on quick resolutions.
If the bankrupt exchange gets the claim tossed, 3AC might lose most of its $1.5B or get downgraded to a general creditor, slashing payouts. This could ripple through crypto markets, so stay vigilant about related assets.
This FTX-3AC clash adds uncertainty to an already volatile market, but direct impacts are unclear. With both firms in bankruptcy, focus on broader market trends and avoid knee-jerk moves based on this drama.
