According to a report by The Block, a U.S. bankruptcy court ruled on Thursday to allow the collapsed cryptocurrency hedge fund Three Arrows Capital to increase its claim against the FTX exchange from $120 million to $1.53 billion.
Despite opposition from the FTX bankruptcy estate, which argued that Three Arrows Capital’s motion to amend the claim was filed too late, the court made the above ruling. The court found that Three Arrows Capital’s liquidators provided timely notice of the claim, and that the primary reason for the significant delay was the FTX debtors’ postponement of sharing records. Court documents stated:
Three Arrows Capital, co-founded by Su Zhu and Kyle Davies, was once a prominent hedge fund in the cryptocurrency market. In 2022, the firm collapsed due to a liquidity crisis triggered by the collapse of the Terra ecosystem, with subsequent investigations revealing inadequate internal risk management measures. FTX, on the other hand, filed for bankruptcy protection in November of the same year due to allegations of fraud and other misconduct. Its bankruptcy restructuring team began repaying customers in February this year and plans to gradually repay the remaining creditors over the coming months.
Initially, Three Arrows Capital filed a $120 million claim in June 2023 and later requested to expand the claim amount to the current figure to include claims for default, asset recovery, unjust enrichment, breach of fiduciary duty, indemnification, and other damages. The FTX bankruptcy estate countered that the scale of Three Arrows Capital’s new claim was “excessive” and would cause “significant hindrance” to its restructuring plan, as the plan did not account for the new claims from Three Arrows Capital during negotiations.
However, the court still ruled that the evidence provided by FTX was insufficient to support its position and noted that Three Arrows Capital had indicated at the time of the initial claim that it might later submit other related claims.
