FTX Debt Repayment May Change as U.S. Court Approves Three Arrows Capital’s Claim Increase to $1.5 Billion

According to a report by The Block, a U.S. bankruptcy court ruled on Thursday to allow the defunct 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 aforementioned ruling. The court determined that the liquidators of Three Arrows Capital provided timely notice of the claim, and that the main reason for the significant delay was the FTX debtors’ tardiness in sharing records. Court documents stated:

Three Arrows Capital, co-founded by Su Zhu and Kyle Davies, was once a prominent hedge fund in the cryptocurrency market. The company collapsed in 2022 due to a liquidity crisis triggered by the collapse of the Terra ecosystem, and subsequent investigations revealed inadequate internal risk management measures. FTX, on the other hand, filed for bankruptcy protection in November of the same year due to alleged fraud and other misconduct, with its restructuring team beginning to repay customers in February this year and planning to gradually settle remaining creditors over the coming months.

Three Arrows Capital initially filed a claim of $120 million in June 2023 and later requested an increase to the current amount to include claims for default, asset recovery, unjust enrichment, breach of fiduciary duty, indemnification, and other damages. The FTX bankruptcy estate countered that the scale of the new claim from Three Arrows Capital was “excessive” and would cause “significant hindrance” to the implementation of its restructuring plan, as the plan did not take into account the additional claims from Three Arrows Capital during negotiations.

However, the court ruled that the evidence provided by FTX was insufficient to support its position, pointing out that Three Arrows Capital had indicated the possibility of submitting additional related claims when it initially filed its claim.