669 B.R. 298
Bankr. D. Del.2025Background
- Three Arrows Capital, Ltd. (3AC), a major crypto hedge fund, collapsed in June 2022 and went into liquidation in the British Virgin Islands (BVI).
- The BVI-appointed liquidators (Crumpler and Farmer) filed an initial $120M proof of claim in the FTX bankruptcy, based on incomplete information due to lack of access and cooperation from 3AC founders and FTX.
- After ongoing discovery delays, primarily due to FTX not promptly providing key data and analysis (which it possessed earlier), liquidators eventually discovered the true amount at stake could be as high as $1.53 billion, relating to asset liquidations on the FTX platform in June 2022.
- The Liquidators sought to amend their proof of claim over a year after the bar date, adding broader legal theories and greatly increasing the claim amount.
- FTX objected, arguing the amendment was untimely, did not relate back to the original claim, and would prejudice the estate.
- The court was tasked with determining whether the amendment should be permitted under bankruptcy law standards for post-bar-date claim amendments.
Issues
| Issue | Plaintiff's Argument (Liquidators) | Defendant's Argument (FTX) | Held |
|---|---|---|---|
| Does the amended proof of claim sufficiently relate back to the original? | All claims arise from the same underlying transaction (June 2022 liquidation of 3AC’s FTX account) and the original claim reserved the right to amend as more facts were uncovered. | New claims are fundamentally different in scope, basis, and amount from original POC; not proper amendment but new claims. | Amendment permitted; facts and circumstances underlying both are essentially unchanged, providing sufficient notice. |
| Is there undue prejudice to FTX/Debtors from allowing the amendment? | FTX had early possession of key information and withheld it, so any delay or prejudice is self-inflicted. | The scale of new claims is much larger and will disrupt reorganization and plan implementation. | No evidence of undue prejudice to FTX; mere claim of prejudice insufficient. |
| Was there undue delay or bad faith by Liquidators in seeking the amendment? | Delay was due to lack of access and FTX’s own failure to provide information; liquidators acted diligently under the circumstances. | Liquidators had access to key data earlier and failed to analyze it promptly; delay was within their control. | Delay attributed primarily to FTX’s own actions; Liquidators acted diligently given obstacles. |
| Equitable considerations: Should amendment be allowed under Rule 9006(b)(1) (excusable neglect/equitable analysis)? | Circumstances warrant equitable relief due to informational disadvantages and cooperating in discovery. | Liquidators acted in bad faith or with dilatory motives; amendment is not justified. | Amendment is equitable; no bad faith or undue advantage to Liquidators identified. |
Key Cases Cited
- In re Ben Franklin Hotel Associates, 186 F.3d 301 (3d Cir. 1999) (amendments to claims post-bar date must not be new claims)
- Hatzel & Buehler, Inc. v. Station Plaza Assoc., L.P., 150 B.R. 560 (Bankr. D. Del. 1993) (amendments not to be used to circumvent bar date)
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380 (1993) (factors for excusable neglect under Bankruptcy rules)
- Holstein v. Brill, 987 F.2d 1268 (7th Cir. 1993) (claims amendments post-confirmation require compelling reasons)