Recently discovered court documents have revealed that FTX, the cryptocurrency exchange, clandestinely liquidated $1.53 billion of Three Arrows Capital (3AC) assets merely two weeks prior to the hedge fund’s sudden collapse in 2022. This new information contradicts prior suggestions that the fall of 3AC was purely owing to market forces.
At the peak of its success, 3AC was valued at more than $10 billion and had borrowed from over 20 large entities. However, it went under in mid-2022 after the cryptocurrency market crash in May 2022, which witnessed Bitcoin’s staggering drop to $16,000.
FTX’s liquidation of $1.53 billion in 3AC assets shortly before the fund’s liquidation has now come to light, thanks to new evidence. According to the pseudonymous co-founder of FTX Creditor, “Mbottjer”, 3AC has requested a bankruptcy court to let it increase its claim against FTX from $120 million to $1.53 billion.
Interestingly, 3AC claims it was never notified of these liquidations due to FTX’s own bankruptcy proceedings. The court remarked that 3AC acted in good faith, allowing it to pursue its full $1.53 billion claim in FTX’s bankruptcy case.
Towards the end of 2023, a British Virgin Islands court froze $1.14 billion worth of assets held by 3AC co-founders, Kyle Davies and Su Zhu. As per estimations by Teneo, 3AC creditors are still owed roughly $3.3 billion after the hedge fund’s 2022 collapse.
Despite the considerable sum of the liquidations, analysts believe that the additional $1.5 billion would not have been enough to prevent 3AC’s bankruptcy. Nicolai Sondergaard, a research analyst at Nansen elaborated, “It seems to me that 3AC, while being allowed to pursue a much larger amount, likely won’t get the full $1.53 billion claim. It seems realistic that they will get more, but how much is uncertain.”
The latest revelations have sparked interest and intrigue in the crypto community, with Binance co-founder and former CEO Changpeng Zhao terming the situation as an “interesting turn of events.”