FTX’s Secret Liquidation Scandal: A Tale of Missing Millions

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FTX’s Secret Liquidation Scandal: A Tale of Missing Millions 🤑

FTX’s Secret Liquidation Scandal: A Tale of Missing Millions

It appears that FTX, the erstwhile darling of the crypto world, has been embroiled in a most unfortunate scandal. Newly revealed court documents have shed light upon the exchange’s clandestine liquidation of $1.53 billion in assets belonging to the ill-fated Three Arrows Capital (3AC) just two weeks prior to the hedge fund’s collapse in 2022. One cannot help but wonder, dear reader, what other secrets lie hidden beneath the surface of this most tumultuous of tales.

Once a behemoth of the crypto world, valued at a staggering $10 billion, 3AC’s downfall was a precipitous one. The hedge fund’s leveraged directional trades had turned sour, and it had borrowed from over 20 large institutions before the fateful May 2022 crypto crash, which saw Bitcoin plummet to a mere $16,000.

However, recent revelations have cast a most unflattering light upon FTX’s actions. It appears that the exchange liquidated $1.53 billion worth of 3AC’s assets just two weeks ahead of the hedge fund’s collapse. One is left to ponder, dear reader, whether this clandestine liquidation was the final nail in 3AC’s coffin, or merely a symptom of a far greater malaise.

3AC has since asked a bankruptcy court to increase its claim against FTX from a paltry $120 million to a more substantial $1.53 billion. The crypto hedge fund claims it was never notified of these liquidations due to FTX’s own bankruptcy proceedings. A court, in a most surprising turn of events, has ruled that 3AC acted in good faith, allowing it to pursue its full $1.53 billion claim in FTX’s bankruptcy case.

FTX Liquidation Scandal

On December 21, 2023, a British Virgin Islands court froze $1.14 billion worth of 3AC co-founder Kyle Davies and Su Zhu’s assets. Teneo has since estimated that 3AC creditors are still owed a staggering $3.3 billion following the hedge fund’s collapse in 2022.

Davies has since claimed that allegations from Teneo – the firm in charge of 3AC’s liquidation – that he and co-founder Su Zhu were “not cooperating” were exaggerated. One cannot help but wonder, dear reader, what other secrets lie hidden beneath the surface of this most tangled of webs.

While the $1.53 billion sum is significantly larger than FTX’s previously disclosed liquidations, it may not have been enough to save 3AC from bankruptcy, according to Nicolai Sondergaard, research analyst at Nansen:

“From what I can see, even if they in 2022 had the additional $1.5 billion they still would not have been able to meet creditor claims/debt repayments.”

“Without being a legal expert, it seems to me that 3AC, while being allowed to pursue a much larger amount, likely won’t get the full $1.53 billion claim. It seems realistic that they will get more, but how much is uncertain,” the analyst added.

Binance co-founder and former CEO Changpeng Zhao called the revelations an “interesting turn of events.”

Changpeng Zhao

“I am curious if FTX had anything to do with the LUNA/UST crash/depeg in May 2022,” Zhao said in a March 14 X post.

The collapse of 3AC occurred a month after that of Terraform Labs’ Terra (LUNC) and TerraClassicUSD (USTC) tokens and shortly before crypto lender Celsius paused all user withdrawals after its native token Celsius (CEL) dropped 90%.

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2025-03-14 15:25