FTX counters Three Arrows Capital's claim of $1.53 billion as "unreasonable and unsupported"

According to Gate News bot, CryptoSlate reports that FTX bankruptcy lawyers strongly oppose the $1.53 billion claim made by the bankrupt crypto hedging fund Three Arrows Capital (3AC), stating that the demand is "illogical" and warning that it would unfairly deplete the funds of FTX's legitimate creditors.

In a new court filing submitted on June 20, FTX's legal team requested that the Delaware bankruptcy judge dismiss all claims by 3AC, stating that the so-called losses of the trading firm were caused by excessive risk-taking and neglect of margin calls, rather than any misconduct by FTX.

The focal point of the controversy is the margin trading conducted by 3AC at the FTX exchange in 2022. At that time, 3AC, which was heavily leveraged in the encryption sector, obtained a credit line of $120 million from FTX to fund large positions.

According to FTX, the hedge fund violated margin requirements in June 2022 after the collapse of the TerraUSD stablecoin triggered a larger market crash.

The exchange added that when it notified 3AC that the collateral amount in its account had fallen below the required threshold, the company reportedly did not respond for more than six hours and instead withdrew $18 million worth of Ethereum (ETH), further exacerbating the funding shortfall.

In response to the so-called emergency credit default, FTX liquidated 3AC's accounts and recovered $82 million. FTX's lawyers insist that this liquidation not only complies with contractual provisions but also helps prevent larger gaps in the estate's balance sheet.

According to the lawyer, if liquidation does not occur, these accounts will face a loss of $18 million on the day FTX submitted the application. Any actions taken by FTX did not result in any loss of value, therefore, 3AC's claim against FTX is purely fictitious.

The document accuses 3AC of inflating its initial claim amount of $120 million by more than 10 times using "unreasonable and unsupported starting premises."

To support its position, FTX submitted the testimony of Steven P. Coverick, Managing Director of the consulting firm Alvarez & Marsal, who reconstructed the relevant transactions and concluded that the forced sale was reasonable and necessary to prevent further losses.

The estate management agency also provided expert opinion from Stephen Atherton, the Queen's Counsel of the British Virgin Islands, who believes that the legal theory proposed by 3AC under British Virgin Islands law is unreasonable.

FTX's lawyers argued that 3AC's attempt to reclaim billions of dollars was to cover up its own failed liquidation process and to shift the blame onto FTX's remaining creditors, who are still waiting for their debts to be repaid after the exchange's collapse in November 2022.

The lawyers argued: "3AC attempted to extract value from the debtor's assets at the expense of the legitimate creditors' interests in order to save its own failed liquidation process. However, the creditors of FTX should not and cannot become the backing of 3AC's failed trading strategies."

This conflict marks the latest development in the billion-dollar claims and counterclaims dispute triggered by the abrupt collapse of two encryption companies.

According to the current schedule, 3AC must submit a formal response by July 11 and hold a non-evidentiary hearing in Delaware on August 12.