Recent developments in the cryptocurrency sector have raised questions regarding the circumstances surrounding the downfall of Three Arrows Capital (3AC), a hedge fund that once boasted a valuation exceeding $10 billion. Newly disclosed court documents reveal that FTX, a leading cryptocurrency exchange, liquidated $1.53 billion in 3AC assets a mere two weeks before the hedge fund’s eventual collapse in 2022. This revelation challenges the prevailing narrative that 3AC’s failure was solely a consequence of market conditions.
Having engaged in leveraged trading with over 20 large institutions prior to the May 2022 crypto crash, which saw Bitcoin (BTC) plummet to $16,000, 3AC was already teetering on the edge when it sought the court’s permission to increase its claim against FTX from $120 million to an eye-watering $1.53 billion.
According to sources, 3AC claims it only recently uncovered evidence pertaining to the liquidation, emphasizing that FTX’s actions occurred without their knowledge due to the exchange’s bankruptcy proceedings. A court ruled in favor of 3AC, permitting them to pursue their expanded claim, underscoring the complex interplay of legal and financial factors at play.
Source: Mbottjer
Additionally, the British Virgin Islands court has acted to freeze $1.14 billion worth of assets belonging to 3AC co-founders, underscoring the ongoing fallout from the hedge fund’s collapse. While the discovery of this $1.53 billion sum is substantial, experts suggest that it may not have been sufficient to prevent 3AC’s bankruptcy. Nicolai Sondergaard, a research analyst at Nansen, noted that even with this additional capital, 3AC may still have been unable to meet its creditor claims.
The revelations surrounding FTX and 3AC continue to evolve, prompting industry leaders, including Binance co-founder Changpeng Zhao, to speculate about the potential connections between FTX’s activities and other significant crypto market events, specifically the LUNA/UST crash of May 2022.
This ongoing saga illustrates the intricate web of financial relationships and the profound impact of the unfolding narrative on the cryptocurrency landscape. As further details emerge, the industry remains alert to the implications for all parties involved.
Related: US court gives Three Arrows nod to increase its FTX claim to $1.53B
