Amidst a Busy Agenda, a Very Critical Development Occurred for the Bankrupt Cryptocurrency Exchange FTX!

The Crypto exchange FTX’s liquidation process is managed by the FTX Recovery Trust, which submitted a 94-page formal objection to the U.S. Delaware bankruptcy court to completely reject the claims of over 1.5 billion dollars from the bankrupt hedge fund Three Arrows Capital (3AC).

In the objection petition, it was stated that 3AC's request is based on a "unrealistic, unsubstantiated, and erroneous assumption regarding the account balance." FTX argues that 3AC has overstated the value of its digital assets.

3AC's request is based on the claim that FTX held approximately 1.6 billion dollars worth of digital assets on the platform during the period it filed for bankruptcy in November 2022. However, according to FTX's statement, as of June 2022, this account was only valued at 284 million dollars, which included over 733 million dollars in margin debt.

FTX alleged that 3AC tried to present its highly leveraged positions as "clean value" by ignoring this debt burden. According to the file, a large portion of this $284 million asset disappeared within just two days. While $222 million was wiped out due to the decline in crypto markets, $60 million was withdrawn directly by 3AC.

FTX stated that they liquidated a position of only 82 million dollars, which occurred due to 3AC exceeding its limits in response to margin calls. It is argued that this transaction was in accordance with the contract and "prevented negative account balances."

The petition included the following statements: "FTX creditors should not be the insurance for 3AC's failed transactions. The hedge fund took risky positions and messed it up. FTX did what was necessary as these positions collapsed."

If the court rules in favor of FTX, the creditor claim of 3AC may be completely rejected or significantly reduced by being assessed only as an ordinary creditor. This means that the fund may only receive a small portion of the amount it is claiming.

The next hearing will be held on August 12.

*It is not investment advice.

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