According to a report by The Block, the 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 the liquidators of Three Arrows Capital timely provided the notice of claim, and the primary reason for the significant delay was attributed to the FTX debtors’ delay in sharing records. The 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, and subsequent investigations revealed insufficient internal risk management measures. FTX, on the other hand, filed for bankruptcy protection in November of the same year due to fraudulent activities and other misconduct, with the bankruptcy restructuring team beginning to repay customers in February this year and planning to gradually repay the remaining creditors in the coming months.
Three Arrows Capital initially filed a claim for $120 million in June 2023, later requesting to increase the claim amount to the current figure to include claims for defaults, asset recovery, unjust enrichment, breach of fiduciary duty, indemnification, and other damages. The FTX bankruptcy estate countered that Three Arrows Capital’s new claim was “excessive” and would cause “significant hindrance” to its restructuring plan’s implementation, as the plan did not account for Three Arrows Capital’s new claims during negotiations.
However, the court 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 file other related claims later.