The legal battle between FTX and collapsed hedge fund Three Arrows Capital (3AC) has intensified, as FTX’s bankruptcy estate moves to nullify a $1.5 billion claim it says is based on “fiction.” In a Friday court filing, FTX argued that 3AC misrepresented the value of its holdings and ignored the extensive margin debt tied to its trading activity.
FTX contends that at the time of its collapse, 3AC’s account balance was just $284 million, including hundreds of millions in borrowed funds, and that any subsequent losses stemmed from market volatility and 3AC’s own withdrawals.
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According to FTX lawyers, internal records show that after margin calls went unanswered, FTX liquidated assets to prevent a negative balance. The estate now accuses 3AC of trying to recoup failed bets at the expense of other creditors. A hearing is set for August 12, while 3AC has until July 11 to respond to the objection.
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