A US bankruptcy court has granted the liquidators of Three Arrows Capital (3AC) approval to increase their claim against the collapsed FTX crypto exchange from $120 million to $1.53 billion. 

The ruling, issued by Judge John Dorsey in the District of Delaware, comes after months of legal battles between 3AC’s liquidators and FTX debtors over the legitimacy and scale of the claim.

3AC, once a prominent hedge fund in the crypto space, filed for liquidation in the British Virgin Islands (BVI) in June 2022 after suffering catastrophic losses during the crypto market downturn. 

The hedge fund’s liquidators, Russell Crumpler and Christopher Farmer, initially filed a $120 million proof of claim against FTX in June 2023, alleging wrongful liquidation of 3AC’s assets on the platform. However, as more evidence emerged, the liquidators argued that FTX had liquidated $1.53 billion worth of 3AC’s assets in June 2022, just weeks before 3AC’s collapse.

FTX debtors opposed the motion, asserting that the claim amendment was untimely and excessive. They argued that the original claim did not sufficiently put FTX on notice regarding the full extent of the claims, and allowing such a drastic increase would disrupt FTX’s ongoing bankruptcy proceedings.

Judge Dorsey, however, disagreed with FTX's objections, ruling that the amendment was justified due to the delayed access to crucial financial records. 

The court acknowledged that FTX had withheld key documents that could have helped 3AC’s liquidators assess their full claim sooner. Dorsey noted that while the scope of the claim had expanded, the fundamental legal basis remained the same—FTX’s alleged improper liquidation of 3AC’s assets to cover outstanding liabilities.

The court’s ruling cited several important findings. It was determined that FTX allegedly liquidated $1.53 billion worth of 3AC’s assets between June 12 and June 14, 2022, shortly before 3AC’s collapse. 3AC’s liquidators were initially provided with limited transaction records, making it difficult to determine the full extent of FTX’s role. 

The FTX debtors delayed responses to information requests and only produced critical financial documents in late 2024. The court deemed FTX’s objections insufficient, noting that its own records showed the disputed transactions were substantial and directly related to 3AC’s financial collapse.

The approval of 3AC’s $1.53 billion claim significantly impacts the FTX bankruptcy estate, potentially reducing the payout available to other creditors. The decision may also influence future cryptocurrency bankruptcy cases, as courts increasingly scrutinize interactions between failed crypto firms and how assets were managed before collapse.