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Key Takeaways:FTX secretly liquidated $1.53 billion in Three Arrows Capital (3AC) assets just two weeks before 3AC’s collapse in 2022.3AC has increased its claim against FTX from $120 million to $1.53 billion, arguing that it was unaware of the liquidations.Despite the missing $1.5 billion, analysts believe 3AC would still have collapsed due to its extensive debts.3AC creditors remain owed approximately $3.3 billion, with a British Virgin Islands court freezing $1.14 billion in assets from co-founders Kyle Davies and Su Zhu.FTX’s Undisclosed Liquidation of 3AC AssetsNewly revealed court documents show that FTX liquidated $1.53 billion worth of Three Arrows Capital (3AC) assets in early 2022, just two weeks before the hedge fund collapsed. This challenges the previous belief that 3AC’s failure was entirely market-driven.3AC, once valued at over $10 billion, collapsed following the May 2022 crypto crash, which saw Bitcoin (BTC) fall to $16,000. The hedge fund had borrowed from more than 20 major institutions, engaging in highly leveraged trades that unraveled as market conditions deteriorated.However, recently discovered evidence suggests that FTX may have significantly contributed to 3AC’s downfall. The exchange liquidated 3AC’s holdings without notifying the firm, and 3AC is now pushing for a full $1.53 billion claim in FTX’s bankruptcy case."3AC says it only recently discovered evidence that FTX liquidated $1.53 billion of its assets just two weeks before it went into liquidation—far more than the $120M originally claimed," noted “Mbottjer,” a pseudonymous co-founder of FTX Creditor.Legal Battle Over 3AC's Missing FundsA U.S. court has now ruled in favor of 3AC, allowing it to expand its claim against FTX. The hedge fund contends that FTX’s own bankruptcy proceedings kept the liquidation hidden from them.In a separate legal action, a British Virgin Islands court froze $1.14 billion of assets linked to 3AC co-founders Kyle Davies and Su Zhu. Despite this, liquidators Teneo estimate that 3AC creditors are still owed $3.3 billion.Davies has disputed claims that he and Su Zhu were uncooperative in the liquidation process, stating that Teneo exaggerated their allegations.Would 3AC Have Survived With the Missing $1.5 Billion?Despite the large sum involved, analysts believe that even if 3AC had retained the $1.5 billion, it would not have been enough to prevent collapse.“Even if they had the additional $1.5 billion in 2022, they still would not have been able to meet creditor claims or debt repayments,” said Nicolai Sondergaard, research analyst at Nansen.The uncertainty remains as to whether 3AC will successfully recover the full $1.53 billion from FTX’s bankruptcy case. Analysts predict that 3AC will receive more than its initial $120M claim, but securing the full amount is unlikely.Market ReactionsThe revelations have sparked renewed scrutiny over FTX’s role in the crypto market’s 2022 collapse. As FTX’s bankruptcy proceedings continue, the outcome of 3AC’s claim could impact creditor distributions and shape the future of crypto bankruptcy settlements, according to Cointelegraph.