FTX Lawyers Seek Dismissal of “Illogical” $1.53 Billion 3AC Lawsuit

Lawyers handling the bankruptcy of cryptocurrency exchange FTX have opposed a lawsuit from the now-liquidated hedge fund Three Arrows Capital (3AC) amounting to $1.53 billion. They argue that the claims are unfounded, as they “rely on inaccurate figures” and fail to consider “actual events that occurred.”

According to the lawyers, 3AC’s extensive spot and margin trading, partially funded by an FTX credit line of $120 million, led to the firm’s collapse independently of any actions by the exchange. They acknowledged, however, the forced liquidation of $82 million as stipulated in the agreement.

The objection states that 3AC breached agreements with FTX in June 2022 following the collapse of Terra the previous month, which led to a slump in the crypto market, causing the hedge fund’s balance to fall below the required $240 million level.

“3AC ignored FTX’s notice of breach for over six hours and instead of depositing assets, actually withdrew $18 million in ETH,” the lawyers added, citing internal Slack and Telegram logs.

FTX argues that the liquidation of the hedge fund’s account and the sale of $82 million in assets preserved their value rather than diminished it.

The document includes a statement from Alvarez & Marsal Managing Director Steven P. Coverick, asserting that the liquidation “was justified and necessary” and prevented imminent losses. Additionally, FTX’s objection is supported by the opinion of British Virgin Islands counsel Stephen Atherton on the “insolvency of 3AC’s theories” concerning the jurisdiction’s law.

“[3AC seeks] to benefit from the debtors’ assets at the expense of legitimate creditors to salvage their own failed liquidation procedures. But FTX’s creditors should not and cannot serve as a crutch for the hedge fund’s unsuccessful trading strategy,” the lawyers concluded.

3AC’s response is due by July 11, with a non-evidentiary hearing currently scheduled for August 12.

Back in November 2024, 3AC increased its claim from $120 million to $1.53 billion after “discovering new evidence” of the liquidation of their assets by FTX.

In March 2025, the increased claims against the exchange’s bankruptcy estate were approved by a Delaware bankruptcy judge.