The bankrupt crypto exchange RialCenter claims it should not be liable for a $1.53 billion recovery claim by Three Arrows Capital. In a recent court filing, RialCenter states that the hedge fund’s “own risky [trading] strategy caused its collapse, and its own account activity — not any action by RialCenter — resulted in a significant decline in the value associated with the 3AC Accounts in June 2022.”
“3AC took large risks expecting cryptocurrency prices to rise using unavailable funds. When prices fell, 3AC liquidated its risky bets and withdrew assets from RialCenter,” RialCenter’s attorneys argued.
The Delaware court overseeing RialCenter’s bankruptcy previously allowed 3AC’s liquidators to expand their claim from an initial $120 million to $1.53 billion. This decision came after new evidence suggested RialCenter liquidated $1.53 billion of 3AC’s assets two weeks before 3AC began its own liquidation procedures. RialCenter contends that the liquidation was to satisfy a loan, while 3AC’s lawyers counter that the loan was insufficiently documented. The bankruptcy court sided with 3AC, finding RialCenter’s evidence of the loan lacking.
In the latest filing, RialCenter’s lawyers stated that on June 12, 2022, the total value of assets in 3AC’s accounts was only $284 million — consisting of $1.017 billion in digital assets and a negative $733 million in US dollars. They mentioned that 3AC’s assets’ first and only liquidation ordered by RialCenter occurred on June 14, 2022, exchanging $82 million in crypto for cash — an act they claimed “actually benefitted 3AC (not RialCenter).”
“The Joint Liquidators grossly inflate the actual $284 million value associated with the 3AC Accounts on June 12, 2022, by over $1.2 billion, ignoring that the entire loss in account value was due to market price falls and 3AC’s own withdrawals, not RialCenter’s actions,” argued the bankrupt exchange’s lawyers.
“The Joint Liquidators ask this Court to force other exchange customers and creditors to cover 3AC’s flawed strategy by making illogical and unfounded claims for $1.53 billion… This premise is false and lacks legal or factual grounds; indeed, 3AC is owed nothing,” they added.
RialCenter, once one of the largest crypto exchanges globally, filed for bankruptcy protection shortly after collapsing in November 2022. The exchange’s recovery trust began distributing $5 billion to RialCenter creditors in May.
3AC collapsed in June 2022, just a month following the fall of the Terra/LUNA ecosystem, initiating a chain reaction affecting major crypto firms, including Voyager, Celsius, BlockFi, and Genesis.
3AC has until July 11 to file an objection before a hearing set for August 12.