3AC Increases Its Claim Against FTX to $1.53 Billion!

Once valued at over $10 billion, 3AC suffered massive losses in mid-2022 due to leveraged trading positions. When Bitcoin (BTC) plummeted to $16,000, the fund was unable to repay its creditors. However, new evidence shows that FTX liquidated $1.53 billion worth of 3AC assets just two weeks before the hedge fund went into liquidation.

Mbottjer, one of the pseudonymous co-founders of FTX Creditors, stated that 3AC had initially claimed $120 million, but after discovering new documents, it increased its claim to $1.53 billion.

Court Sides With 3AC!

3AC argued that it was unaware of these liquidations because of FTX’s own bankruptcy. The court ruled in 3AC’s favor, allowing the hedge fund to proceed with its full $1.53 billion claim in the FTX bankruptcy case.

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Meanwhile, Teneo, the firm handling 3AC’s liquidation, revealed that creditors are still owed about $3.3 billion. In December 2023, a British Virgin Islands court froze $1.14 billion worth of assets belonging to 3AC co-founders Kyle Davies and Su Zhu.

According to Nicolai Sondergaard, research analyst at Nansen, even if 3AC had received the additional $1.5 billion in 2022, it still would not have been able to repay all creditor claims. “While 3AC is allowed to pursue a higher claim, it’s uncertain whether they’ll receive the full $1.53 billion,” Sondergaard added.

CZ Raises Questions: Was FTX Involved in LUNA/UST Crash?

Binance founder and former CEO Changpeng Zhao (CZ) called these developments an “interesting turn of events.” In a post on March 14, CZ questioned whether FTX had any involvement in the LUNA/UST crash in May 2022.

The 3AC collapse came just one month after the downfall of Terraform Labs’ LUNA and UST, and shortly before Celsius paused all user withdrawals as its token, CEL, dropped by 90%.

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Legal Battle Between 3AC and FTX

In a case heard in the Delaware Bankruptcy Court, Chief Judge John Dorsey rejected objections from FTX creditors. The FTX side argued that 3AC‘s claim was untimely and an attempt to delay the process. However, the court ruled that FTX‘s delayed response in providing necessary documents had caused the delay.

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3AC initially filed a $120 million claim in June 2023. Later, in November 2024, it increased this amount to $1.53 billion, alleging that FTX had engaged in unjust enrichment and failed to fulfill its obligations. According to 3AC, FTX liquidated $1.33 billion of its funds in 2022, causing significant financial damage.

Current Status of the FTX and 3AC Case

FTX objected to 3AC‘s amended claim, arguing that it was filed too late and lacked sufficient information. However, the court determined that 3AC‘s delays resulted from FTX withholding critical records, leading to the approval of the increased claim.

As the FTX bankruptcy proceedings continue, the exchange has also filed lawsuits against SkyBridge Capital, Binance, and Waves to recover lost funds. FTX is actively pursuing legal action to reclaim assets linked to former CEO Sam Bankman-Fried‘s past financial decisions.

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Bitcoin’s Price Action and Selling Pressure

On February 9, Bitcoin dropped to $94,726, marking its lowest level in over a week, before making a strong recovery above $95,000.

According to André Dragosch, head of research at Bitwise Europe, Bitcoin experienced the highest level of selling pressure since the collapse of Three Arrows Capital (3AC) in 2022.

“We have just reached the highest amount of selling pressure on Bitcoin spot exchanges since the collapse of 3AC in June 2022. Yet, the price is still close to $100,000.”

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This indicates that the market still has strong buying support, helping Bitcoin withstand the intense selling pressure.

Bitcoin’s Critical Support and Resistance Levels

Market analysts suggest that if Bitcoin drops below $93,000, it could trigger a wave of liquidations. According to CoinGlass data, a break below this level would liquidate $1.7 billion worth of leveraged long positions across all exchanges.

Ryan Lee, chief analyst at Bitget Research, stated that if Bitcoin falls below $93,000, it could drop further to $91,500. If the selling pressure persists, Bitcoin may even decline below $90,000 due to increasing global economic uncertainty.

Key Technical Levels for Bitcoin:

• Resistance Levels: $98,200 – $104,200
• Support Levels: $95,800 – $92,000

Global Trade Wars and Their Impact on Bitcoin

Bitcoin’s price movements are directly influenced by global trade wars. The new tariffs imposed by the United States and China are causing investor anxiety, increasing pressure on the crypto market.

Furthermore, the scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping to discuss trade relations has been postponed, adding to market uncertainty. According to a Wall Street Journal report on February 4, the meeting date remains uncertain.

Bitcoin is struggling to hold key support levels. A four-hour close above $98,200 could trigger a rapid move toward $104,000. However, if it drops below $93,000, strong selling pressure could push the price down to the $90,000 level.

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The story began in May 2022 when the Terra network observed a $40 billion collapse in its algorithmic stablecoin terraUSD (UST) and companion token, LUNA, despite guarantees from co-founder Do Kwon. Three Arrows Capital declared bankruptcy by July, claiming irreversible damages resulting from Terra’s fall from grace.

According to court documents based on Bloomberg, this case claims TerraForm manipulated the market for Three Arrows Capital to buy Luna and TerraUSD, therefore artificially inflating the price of the assets before they were wiped off.

In January 2024, Terraform filed for bankruptcy in Delaware, United States. On civil fraud allegations presented before the U.S. Securities and Exchange Commission (SEC) in April 2024, a Manhattan jury found Do Kwon guilty.

Do Kwon stays in Montenegro, where he has been since his March 2023 arrest for trying to use fictitious travel documentation. He is waiting on Montenegro’s government to decide where he should be extradited. Authorities from both South Korea and the United States have been looking for his extradition.

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According to the filing, the assets, which are owned by Genesis, a subsidiary of Digital Currency Group, include approximately $1.4 billion worth of Grayscale Bitcoin Trust shares, approximately $165 million worth of Grayscale Ethereum Trust shares, and approximately $38 million worth of Grayscale Ethereum Classic Trust shares.

The company also requested that the deadlines for consideration of the sale motion be shortened so that it can be heard at the bankruptcy court’s next hearing scheduled for Thursday, February 8.

The GBTC shares in question constitute the initial collateral that Genesis transferred to Gemini as part of its Gemini Earn program and some shares acquired through the bankruptcy of Three Arrows Capital.

The company is also seeking to legally claim an additional 31,180,804 shares (worth approximately $1.2 billion) that were pledged to Gemini but never transferred; the ownership of the shares is currently a matter before the court.

In a statement on its website, Gemini called the motion “an important step forward following the approval of Grayscale Bitcoin Trust (GBTC) as an exchange-traded product (ETP) on January 10.”

Earlier this week, Genesis agreed to pay a $21 million fine to the SEC from its post-bankruptcy funds to settle the agency’s lawsuit against the company for operating the Gemini Earn program.

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The company’s liquidator Teneo confirmed the court’s decision, stating that assets had been seized from the founders and Kelly Chen in line with allegations that they were responsible for a depreciation in the value of Three Arrows Capital’s position.

In a statement by Teneo, it was stated that “The IBW Court issued a worldwide freezing order in line with the claims pursued by the liquidators, arguing that the founders should be held responsible for a depreciation equal to the value of 3AC’s position. The freezing of orders is requested”.

Following this development, it is stated that a similar decision was also taken by the court in Singapore. Also, the decision to seize $1 billion in assets belonging to the founders of Three Arrows Capital has caused a great stir in the financial world and the details of the incident are eagerly awaited.

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New York General Prosecutor Office has initiated legal action

Among the companies targeted by the Attorney General are cryptocurrency exchange Gemini, cryptocurrency loan provider Genesis, and cryptocurrency investment company Digital Currency Group (DCG). In addition, there are allegations against Genesis’ former CEO Michael Moro and DCG CEO Barry Silbert.

According to the claim, Genesis had borrowed within the context of the Gemini Earn program and it later transferred this assets to various entities, including different companies such as Three Arrows Capital and Alameda. As a result of some companies in the cryptocurrency sector going bankrupt, Genesis became unable to pay its debts, causing a total deficit of 1 billion dollars. The DCG committed to cover this deficit. However, it failed to fulfill it.

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The main allegation of the New York Attorney General’s Office is that, despite knowing that Genesis Global Capital’s lending operations were under-insured, Gemini did not disclose this important information to investors. Moreover, the lawsuit includes claims that at one point, the trading company Alameda, led by Sam Bankman-Fried, played a major role in the trading of Genesis Global Capital.

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The liquidation officer of the crypto hedge fund Teneo confirmed that they obtained a commitment order against Su for failing to comply with a court order that required his cooperation in an investigation related to liquidation. Furthermore, the authorities sentenced Su to 4 months of imprisonment as a result of this decision.

In its statement, Teneo said,

“Joint liquidation officers, on September 25, 2023, due to Mr. Zhu’s deliberate non-compliance with a court decision that essentially forces him to cooperate with the liquidation officers’ investigations and be accountable, they have applied for an execution order against Mr. Zhu and have received this order.” In addition, Teneo said, “We are operating as one of the founders and former investment managers of 3AC”.

The fund’s other founding partner, Kyle Davies, was also given a similar order and sentenced to four months in prison, but he was not arrested because it was unknown where he was.

In the beginning of September, the Singapore Monetary Authority banned Su and Davies from commercial activities held in the country.

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Three Arrows Capital’s Collapse

Three Arrows Capital was once one of the largest crypto hedge funds. However, it faced problems in months following the collapse of the Terra ecosystem last year. Along with this, it filed for bankruptcy in July 2022 and, at that time, the company had a debt of more than 3.5 billion dollars to its largest creditors according to related documents.

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