FTX's lawyers rejected a $1.53 billion claim filed by Three Arrows Capital ( 3AC ), arguing that the hedge fund's losses were self-inflicted.

Notorious Sam Bankman Freud's defunct crypto exchange FTX has flatly rejected the massive $1.53 billion claims of Three Arrow Capital (3AC), the crypto hedge fund that collapsed after the Terra LUNA crash.

This comes within months of a Delaware bankruptcy court judge allowing 3AC to increase its bankruptcy claims 10-fold, from $120 million to $1.53 billion. In a court filing last Friday,

FTX lawyers rejected the claims, saying 3AC's losses were self-inflicted and the claims should be "dismissed in their entirety."

FTX lawyers say 3AC's demands are unreasonable.

In June 2023, 3AC filed a claim in the FTX bankruptcy estate for $120 million. However, in November 2024 last year, after getting permission from a Delaware court judge, it increased the amount 10 times to $1.53 billion. The liquidators claimed that FTX controlled $1.53 billion in 3AC’s assets, which were liquidated in 2022 to meet liabilities, ultimately accelerating 3AC’s demise.

They claimed the transactions were avoidable and accused FTX of delaying the release of information that could have led to liquidation sooner.

Recent pushback from lawyers came after the crypto exchange began distributing $5 billion to creditors.

FTX lawyers have criticized defunct hedge fund 3AC, saying it is trying to blame the estate for its collapse. Lawyers said the claim was based on "an unreasonable and unsupportable premise, inaccurate data, and blindness to the actual events that occurred."

Lawyers explain why 3AC was abolished.

According to FTX, Three Arrow Capital's liquidation was primarily due to its own extensive placement and margin trading activities, which were partially financed by a $120 million line of credit from FTX.

FTX’s legal team acknowledged the $82 million forced liquidation, saying it was contractually in accordance with the terms of the credit and margin agreements. As a result, the exchange is not liable for 3AC’s collapse.

In June 2022, after Terra collapsed, Three Arrows Capital’s account allegedly fell below the $240 million margin requirement.

Instead of meeting the account's margin requirement, 3AC allegedly ignored FTX's attempts to negotiate and proceeded to withdraw $18 million worth of Ethereum (ETH). In response, FTX liquidated the account, recovering $82 million.

Going forward, Three Arrow Capital has until July 11 to file its response, with a non-evidentiary hearing set for August 12. Lawyers representing FTX stated that 3AC was “attempting to extract value from the borrowers' properties at the expense of legitimate creditors.

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