Hook: Imagine being in a situation where a multi-billion-dollar company accuses one of the biggest crypto exchanges of stealing your assets—this isn’t just about money, it’s about trust, fairness, and the survival of crypto firms.
Three Arrows Capital (3AC), once one of the most prominent crypto hedge funds, is in a serious legal showdown with FTX, the now-infamous exchange that collapsed in 2022. The liquidators of 3AC have decided that the damage done by FTX wasn’t just a simple mistake—they’re taking things to the next level. They’re pushing to increase their claim against FTX from $120 million to a massive $1.53 billion, accusing the exchange of improper liquidation of 3AC’s assets.
The Core of the Dispute: What Happened?
Here’s the scoop: Two weeks before 3AC went bankrupt, FTX liquidated (sold off) 3AC’s assets to settle a $1.33 billion debt. But 3AC’s liquidators aren’t buying it. They say the liquidation was unfair, avoidable, and undervalued—meaning that FTX didn’t just take their assets, it took them in a way that was harmful to 3AC and its creditors. 3AC argues that FTX not only acted unfairly but also delayed providing crucial data that would have helped 3AC understand the full extent of the loss. This meant that the hedge fund couldn’t fully confirm how much it had lost until months later, in August.
FTX’s Response: “We Didn’t Do It”
FTX, however, isn’t backing down. They argue that the liquidation was actually initiated by someone linked to 3AC, but they don’t know who. This raises even more questions about accountability—was it a bad decision from 3AC, or was FTX involved in something shady? Either way, the court hearing on November 20 will decide if 3AC can go ahead with their request to increase the claim.
But Wait, There’s More: 3AC Targets Terraform Labs Too
3AC isn’t just going after FTX. They’re also pursuing $1.3 billion from Terraform Labs, the company behind the disastrous collapse of the TerraUSD (UST) stablecoin and LUNA token. 3AC’s liquidators accuse Terraform of misleading them about the stability of these assets, which led 3AC to make large, risky investments. The whole situation around Terra’s collapse shook the entire crypto market, and now 3AC wants to get compensation for those poor decisions, which they say were driven by misleading marketing.
Why Should You Care?
Now, you might wonder, why does this matter to you, especially if you’re just starting to learn about crypto? Well, the fallout from 3AC’s collapse and its fight with FTX shows exactly how risky and volatile the crypto world can be. Not only are massive players like 3AC and FTX involved, but it also shows that contracts, trust, and transparency are essential in this space. When those are violated, it can lead to billions in losses—and ripple effects that impact the entire crypto ecosystem.
Key Takeaways:
- Improper Liquidation: FTX is accused of selling 3AC’s assets in a way that was unfair and undervalued.
- Legal Drama: The courts will decide whether 3AC can increase their claim to $1.53 billion.
- Terraform Labs: 3AC is also going after $1.3 billion from Terraform Labs, blaming them for misleading the fund about the value of TerraUSD and Luna.
- Market Shocks: The collapse of firms like 3AC and Terraform shows how dangerous the crypto market can be if you’re not careful or fully informed.
Why This is Big:
This legal battle is a clear example of how things can go horribly wrong in the world of crypto. It’s not just about the money, but about fairness and accountability. The outcome of this case could set important precedents for how liquidations, debts, and crypto contracts are handled in the future. It also serves as a warning to any crypto investor or firm that they need to be extremely cautious and make sure everything is in order before they dive in.
This kind of case can affect the entire industry because it sends a message about trust and transparency—something that is crucial for the survival of the crypto market. So, staying informed about these battles and understanding how they unfold is crucial if you want to make smart decisions in this fast-moving space.
