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The liquidators of Three Arrows Capital believe the action of FTX to liquidate $1.33 billion a few weeks before its collapse was unfair and avoidable.
Key Notes
The failure of Three Arrows Capital among other crypto firms in the past few years has significantly shaped the future of web3.The liquidators of 3AC have an uphill task of getting funds back from the defunct FTX and Terra Luna.As defunct cryptocurrency exchange FTX and its sister investment firm Alameda Research prepares to distribute up to $16 billion worth of funds to creditors, the liquidators of Three Arrows Capital (3AC) are now seeking to claw back more funds. According to a report by Bloomberg, 3AC liquidators, Russell Crumpler, and Christopher Farmer of Teneo BVI, have increased their bankruptcy claims against FTX to $1.53 billion from $120 million.
The 3AC liquidators argued that the exchange unfairly liquidated, sold, or moved the assets just two weeks after its collapse, which was triggered by the Terra Luna implosion. Notably, FTX seized $1.33 billion of 3AC’s funds to settle the collateral of a loan, which the liquidators believe was unfair and avoidable.
The liquidators of 3AC highlighted that FTX breached the contract and trust agreement, thus the transaction ought to be invalidated. In its defense, FTX noted that an unidentified individual representing 3AC confirmed the liquidation of the collateral assets.
The motion by 3AC liquidators will be heard on November 20, when the representatives of the two firms will avail themselves of the court.
Cash Distress at Three Arrows Capital
As Coinspeaker previously reported, Three Arrows Capital owes creditors more than $3.5 billion, which was mostly lost following the collapse of Terra Luna IST in early 2022. In August this year, the liquidators of 3AC filed a $1.3 billion claim against the distressed Terra Luna.
Furthermore, Russell Crumpler and Christopher Farmer believe that Terra Luna did not provide accurate information about its financial statements, more so its algorithmic stablecoin that has never recovered to date.
The creditors of 3AC have been eyeing the assets of the hedge fund’s co-founders to be liquidated and distributed among the affected investors. Moreover, the co-founders of 3AC did not provide the creditors with the necessary information to make a proper decision before making the investments.
Last year, a British Virgin Islands court ordered the authorities to freeze assets belonging to 3AC co-founders including Su Zhu, who spent three months in prison.
Bigger Picture
The collapse of several crypto companies after the 2021 bull market has informed several global regulators on the way forward for the promising web3 industry. More Web3 companies have adhered to the set rules to ensure a seamless mainstream adoption.
For instance, DeFi projects aimed at the European maker have to ensure the Markets in Crypto-Assets (MiCA) regulations are adhered to strictly. All DeFi protocols have to navigate through the complex regulatory frameworks in different jurisdictions to avoid closure.
Nonetheless, the Web3 space still presents several risks, including sophisticated attacks. For instance, WazirX users are still counting losses after the company was hacked and more than $230 million stolen.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
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