FTX Recovery Trust, which is managing the liquidation process of cryptocurrency exchange FTX, has filed a formal 94-page objection in the US Delaware bankruptcy court seeking to completely dismiss the over $1.5 billion claim by failed hedge fund Three Arrows Capital (3AC). The appeal states that 3AC’s claim is “unrealistic, unsupportable, and based on an erroneous assumption regarding the account balance.” FTX argues that 3AC overstates the value of its digital assets. 3AC’s claim is based on FTX’s alleged holding of approximately $1.6 billion worth of digital assets on the platform when it went bankrupt in November 2022. However, as of June 2022, that account was worth only $284 million, including margin debt of more than $733 million, according to FTX’s statement. Related News: Bitcoin Price Below $100,000: Research Firm's Head of Research Reveals Next Support Level FTX alleged that 3AC ignored the debt burden and attempted to make its overly leveraged positions appear as “clean value.” According to the filing, most of that $284 million in assets disappeared in just two days. $222 million was wiped out by the crypto market crash, while $60 million was withdrawn by 3AC itself. FTX said they only liquidated one $82 million position after 3AC exceeded limits by not responding to margin calls. It claims this action was in accordance with the contract and “prevented a negative account balance.” The petition stated: “FTX creditors should not be insured against 3AC’s failed trades. The hedge fund took risky positions and messed it up. FTX took action as those positions collapsed.” If the court rules in FTX’s favor, 3AC’s claim could be dismissed entirely or significantly reduced to just ordinary creditor status, meaning the fund would only receive a small portion of the amount it is seeking. The next hearing will be held on August 12. *This is not investment advice. Continue Reading: Major Development Occurs for Bankrupt Cryptocurrency Exchange FTX
