Three Arrows Capital sues FTX for illegal liquidation of $1.5 billion in assets, summons SBF and other executives to testify.

The bankrupt crypto hedging fund Three Arrows Capital (3AC) has filed a lawsuit, accusing FTX of illegally liquidating its positions worth $1.5 billion during the 2022 cryptocurrency market crash, leading to its bankruptcy. To seek the truth, 3AC has subpoenaed several former FTX executives, including former CEO Sam Bankman-Fried (SBF), requiring them to testify.

3AC Legal Proceedings: Allegations of Illegal Liquidation by FTX

According to court documents submitted by 3AC, the fund accuses FTX of pushing it towards bankruptcy through illegal liquidation of its positions. 3AC claims that the total amount of this forced liquidation reached 1.5 billion dollars. The core of the legal dispute revolves around whether FTX's liquidation actions exceeded the contractual limits. 3AC believes that FTX's liquidation decision constituted a betrayal of trust and caused it significant economic losses.

Major Summons: SBF and other former executives are required to appear in court to testify

In order to hold FTX executives accountable for their actions, 3AC has issued subpoenas to SBF, Caroline Ellison, and Ryan Salame.

SBF testifies: Although SBF is currently serving his sentence, he is still required to appear in court to testify on October 14, 2025.

Other executives: Ellison and Salame have both been convicted of crimes related to the FTX scandal, but they are also required to appear in court to answer questions about the liquidation of 3AC assets and their role throughout the process.

FTX Bankruptcy Administrator Responds Strongly: Refutes 3AC Allegations

This legal dispute has become complicated due to the starkly different claims of 3AC and the FTX bankruptcy administration.

FTX's View: FTX submitted a 94-page objection in June 2025, rebutting the initial claim of $1.6 billion made by 3AC. FTX believes that after accounting for margin debts and losses caused by the market downturn in 2022, the actual balance in the 3AC account is only $284 million. FTX's lawyer stated that liquidating $82 million in assets is necessary and in accordance with the contractual terms.

The bankruptcy administrator responded: The FTX bankruptcy management considers the $1.53 billion claim proposed by 3AC in 2024 as an "illogical" attempt, believing that 3AC is trying to shift the responsibility for its failed trades onto FTX's creditors.

Case Background and Latest Developments

Despite the ongoing legal disputes, FTX continues to work towards repaying its creditors.

Repayment Progress: FTX has announced that a new round of creditor repayments will begin around September 30, 2025. So far, FTX has repaid approximately $6.2 billion to affected parties.

Restricted Areas: However, users from 49 restricted jurisdictions are excluded from the repayment scope, which limits the recourse for some investors.

Executive Sentences: Caroline Ellison received a reduced sentence for her active cooperation in the investigation, with her sentence shortened to 2 years; Ryan Salame was sentenced to 7.5 years in prison, but according to records from the Federal Bureau of Prisons, his sentence has also been reduced.

Conclusion

The legal battle between Three Arrows Capital and FTX is a microcosm of the complex and controversial chain reaction triggered by the collapse of the crypto market in 2022. As former executives like SBF are subpoenaed to testify, the case enters a new phase. The outcome of this lawsuit will not only affect both parties but may also set an important precedent for future crypto assets bankruptcy cases and how hedge funds handle similar disputes.