FTX liquidated $1.5B in 3AC assets 2 weeks before hedge fund’s collapse

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Newly revealed tribunal documents amusement that FTX secretly liquidated $1.53 cardinal successful Three Arrows Capital (3AC) assets conscionable 2 weeks earlier the hedge money collapsed successful 2022. The disclosure challenged erstwhile narratives that 3AC’s downfall was solely market-driven.

Once valued astatine implicit $10 billion, 3AC collapsed successful mid-2022 aft a bid of leveraged directional trades turned sour. The hedge money had borrowed from implicit 20 ample institutions earlier the May 2022 crypto crash, which saw Bitcoin (BTC) autumn to $16,000.

However, recently-discovered grounds shows that the FTX speech liquidated $1.53 cardinal worthy of 3AC’s assets conscionable 2 weeks up of the hedge fund’s collapse.

3AC “asked a bankruptcy tribunal to fto it summation its assertion against FTX from $120 cardinal to $1.53 billion,” according to “Mbottjer,” the pseudonymous co-founder of FTX Creditor, a radical FTX creditors and bankruptcy assertion buyers.

“3AC says it lone precocious discovered grounds that FTX liquidated $1.53B of 3AC’s assets conscionable 2 weeks earlier 3AC itself went into liquidation, overmuch much than the $120M primitively claimed,” they stated.

The crypto hedge money claims it was ne'er notified of these liquidations owed to FTX’s ain bankruptcy proceedings. A tribunal ruled that 3AC acted successful bully faith, allowing it to prosecute its afloat $1.53 cardinal assertion successful FTX’s bankruptcy case.

On Dec. 21, 2023, a British Virgin Islands tribunal froze $1.14 cardinal worth of 3AC co-founder Kyle Davies and Su Zhu’s assets. Teneo has since estimated that 3AC creditors are inactive owed astir $3.3 cardinal pursuing the hedge fund’s illness successful 2022.

Davies claimed that allegations from Teneo — the steadfast successful complaint of 3AC’s liquidation — that helium and co-founder Su Zhu were “not cooperating” were exaggerated.

Missing $1.5 cardinal not capable to debar 3AC collapse

While the $1.53 cardinal sum is importantly larger than FTX’s antecedently disclosed liquidations, it whitethorn not person been capable to prevention 3AC from bankruptcy, according to Nicolai Sondergaard, probe expert astatine Nansen:

“From what I tin see, adjacent if they successful 2022 had the further $1.5 cardinal they inactive would not person been capable to conscionable creditor claims/debt repayments.”

“Without being a ineligible expert, it seems to maine that 3AC, portion being allowed to prosecute a overmuch larger amount, apt won’t get the afloat $1.53 cardinal claim. It seems realistic that they volition get more, but however overmuch is uncertain,” the expert added.

Binance co-founder and erstwhile CEO Changpeng Zhao called the revelations an “interesting crook of events.”

“I americium funny if FTX had thing to bash with the LUNA/UST crash/depeg successful May 2022,” Zhao said successful a March 14 X post.

The illness of 3AC occurred a period aft that of Terraform Labs’ Terra (LUNC) and TerraClassicUSD (USTC) tokens and soon earlier crypto lender Celsius paused each idiosyncratic withdrawals aft its autochthonal token Celsius (CEL) dropped 90%.