If you’ve ever stared at a spreadsheet of bankruptcy filings and wondered, “How on earth did that number get so big?”, you’re in good company. I nearly choked on my coffee when I read $1.53 billion—that’s the figure Three Arrows Capital’s (3AC) liquidators are now waving at FTX’s bankruptcy estate, up from the original $120 million. That’s a 12-x jump in less than a year. Wild, right?
Here’s What Actually Happened (as far as we can tell)
Let’s rewind to mid-2022. You probably remember the domino line: Terra imploded in May, Celsius froze withdrawals in June, and by July 2, Three Arrows Capital filed for Chapter 15 protection in New York. Fast-forward to November 11, 2022—FTX pulls the fire alarm and files for Chapter 11. Now, two of crypto’s biggest carcasses are circling each other in a court-mandated scavenger hunt, each claiming the other still has meat on the bones.
3AC’s liquidators, managed by advisory giant Teneo, originally lodged a claim for roughly $120 million in assets they believed FTX still held. On September 29, they amended that claim to a jaw-dropping $1.53 billion. I’m not entirely sure how you misplace a cool $1.4 billion the first time around, but apparently they found extra “loan repayments and collateral” after combing through on-chain records, exchange API exports, and internal chat logs. (If you’ve ever tried to match .csv exports from multiple exchanges, you can sympathize.)
Time-Out: What Does FTX Say?
FTX’s new management team—headed by restructuring veteran John J. Ray III—filed a motion on October 2 calling the 3AC claim “facially absurd.” They basically argue:
- 3AC was net a borrower on FTX: roughly $3.7 billion in margin balances pre-collapse, according to internal risk dashboards leaked last November.
- Any repayments FTX made in the frantic days before its own bankruptcy are subject to clawback under U.S. preference rules (the dreaded 90-day look-back period).
- The liquidators haven’t provided full wallet-level proof for the extra $1.4 billion, just a “spreadsheet with color-coded cells.” Yes, that’s in the filing—FTX’s lawyers seem as exasperated as you are.
Ray’s team wants the Delaware bankruptcy judge to dismiss the bulk of the claim and re-classify whatever remains as unsecured, meaning 3AC would stand in line behind customer creditors. “3AC is owed nothing,” the filing reads. Ouch.
Let’s Translate the Legalese Into Code (Metaphorically)
If you’re more comfortable thinking in Solidity than statute books, you can imagine both estates as smart contracts juggling IOUs. Each contract tries to optimize recovery for its token holders (creditors) by pulling assets from any address that still owes them funds. Unfortunately, neither has a global view—so they spam function calls (lawsuits) at one another, hoping the judge, a sort of on-chain oracle, returns a favorable boolean.
Developer and bankruptcy-data nerd Simon von Wirtz told me over Telegram,
“It’s like a forced merge of two Git branches that never shared a common ancestor. The conflicts are everywhere, and no one agrees on the last good commit.”
I couldn’t put it better. Each estate’s ledger is a forked history of leveraged positions, cross-collateralized loans, and last-minute asset shuffles. Good luck diff-ing that without flinging some $1-billion placeholders into the mix.
Why This $1.53 Billion Number Keeps Morphing
In my experience, big Chapter 11 cases look less like tidy accounting and more like archaeology. You poke around dusty database snapshots, Telegram threads, even WhatsApp audio notes. Every so often you uncover another semi-buried hardware wallet or a counterparty ledger that adds—sometimes subtracts—nine digits from the balance sheet.
Here’s the short version of how 3AC’s liquidators claim the number ballooned:
- Loan pay-downs that 3AC insists were “prematurely” liquidated—roughly $940 million of collateral, including SOL and SRM, which FTX allegedly sold to satisfy margin calls.
- Stablecoin transfers made in the 24 hours before FTX halted withdrawals: $220 million USDC + $65 million USDT.
- OTC trades booked but never settled: another $305 million worth of BTC and ETH, based on 3AC trade blotters.
It’s messy because many of those assets fell 70-90% in value between mid-2022 and FTX’s November implosion. Do you mark to market on the trade date, the petition date, or today’s price? Even the U.S. Bankruptcy Code can’t make up its mind.
Okay, but What Does This Mean for You as a Retail Holder?
You might shrug and think, “I never had funds on 3AC or FTX—why should I care?” Two reasons:
- Precedent for clawbacks. If the judge sides with FTX, expect more aggressive retrieval actions against anyone who withdrew big sums in the 90 days before November 11. Some OTC desks are already bracing for subpoenas.
- Treatment of inter-estate claims. The crypto world is so incestuous (sorry, but it is) that bankruptcies rarely stay siloed. Celsius, Voyager, even BlockFi have overlapping claims. However the court slices this will ripple outward.
Also, keep an eye on token unlock schedules. A fresh dump of recovered SOL or BTC could hit liquid markets once the estate gains control. We’ve seen similar sell-pressure from Mt. Gox and Bitfinex recoveries.
Small Tangent: The Meme Factor
I’ve noticed every time a new filing drops, Zhu Su or Kyle Davies starts tweeting about wellness retreats or “building on optimism.” Meanwhile, FTX’s Sam Bankman-Fried (currently on trial) can’t tweet at all because of his bail conditions. It almost feels like a reality-TV subplot. Remember the scene in Succession where Logan Roy yells, “We’re off the clock”? Yeah, crypto never got that memo.
If You’re a Developer, Here’s the Nerdy Angle
3AC’s liquidators claim to have used nansen.ai and Arkham Intelligence to trace wallet flows. FTX’s team fired back that the analysis ignores internal subaccount bookkeeping. Think of subaccounts as internal namespaces; if you only query top-level addresses, you’ll miss half the story—kind of like inspecting state changes in Ethereum without looking at event logs.
I think we’ll eventually see more on-chain attestations baked into bankruptcy procedures. Imagine a Merkle-proof-of-liabilities notarized on Ethereum or a L2. Kraken has toyed with that idea for proof-of-reserves. Maybe bankrupt exchanges will have to publish the flipside: proof-of-holes.
Where Do We Go From Here?
Short-term, you’re waiting on two clocks:
- November 15 hearing in Delaware, where Judge John Dorsey decides whether to cap 3AC’s claim or send both teams back to the sandbox.
- Sam Bankman-Fried’s criminal trial (jury deliberations could start late October). If new testimony reveals juicy asset movements, both estates might scramble to amend their spreadsheets again.
Medium-term, we’ll probably see a negotiated settlement—maybe 3AC gets a low-nine-figure unsecured claim in exchange for dropping the PR theatrics. That’s my hunch, but hey, I’ve been wrong before. Remember when I thought UST had a fighting chance? Yeah. Let’s not talk about that.
Why This Matters for Your Portfolio
Liquidity shockwaves don’t respect bankruptcy silos. If FTX wins the argument and starts liquidating more SOL, SRM, or BTC, you could see short-term price dips (think 5-10% intraday). Conversely, if 3AC pries free a big chunk of assets, its liquidators will likely convert to USD quickly—same sell-pressure story. Point is, keep an eye on court calendars the way you track FOMC meetings.
One last thing: every messy clawback reinforces why self-custody and transparent DeFi primitives matter. Uniswap can’t secretly rehypothecate your ETH; a centralized exchange can, and apparently did. That might sound preachy, but after two straight years of “black-box” failures, I’m doubling down on cold storage and audited smart-contract venues. You do you, but at least price the risk correctly.
If this all feels overwhelming, you’re not alone. Grab popcorn, check the docket updates, and remember: in crypto, the drama never dies—it just gets tokenized.
