The court ruled in Favor of 3AC after rejecting FTX debtors’ objections. Meanwhile, a Texas federal judge issued a default judgment against Bancor DAO for failing to respond to a class-action lawsuit accusing it of misleading investors about liquidity issues and impermanent loss protection. Additionally, a Delaware court granted a temporary restraining order in a Bitcoin mining dispute, preventing Mawson Hosting from blocking access to 21,000 mining rigs amid a payment conflict with Consensus Colocation.
Bankruptcy Court Sides With Three Arrows Capital
A US bankruptcy court authorized the liquidators of the defunct crypto hedge fund Three Arrows Capital (3AC) to increase their claim against the collapsed exchange FTX, raising it from $120 million to $1.53 billion. The ruling was issued by Chief Judge John Dorsey in the US Bankruptcy Court for the District of Delaware on March 13, and it dismissed arguments from FTX’s debtors that the amended proof of claim from 3AC liquidators was untimely and aimed at delaying the bankruptcy proceedings.
Dorsey found that 3AC liquidators gave sufficient notice of their claim and their intention to amend it after conducting a thorough review of all available data. He also attributed any delays in the filing process to FTX’s failure to provide the relevant records in a timely manner. He mentioned that the evidence indicated that the liquidators were very thorough in their information search, but FTX’s debtors repeatedly withheld crucial data despite having it in their possession.
Originally, 3AC liquidators filed a $120 million claim in June of 2023 as part of FTX’s bankruptcy case. In November 2024, they expanded their claim due to allegations of breach of contract, unjust enrichment, and breach of fiduciary duty.
According to the liquidators, FTX held $1.53 billion in hedge fund assets that were liquidated in 2022 to settle $1.33 billion in liabilities. They argued that these transactions were avoidable and caused harm to 3AC creditors while accusing FTX debtors of intentionally delaying the release of information that would have shed light on the liquidation.
FTX’s debtors objected to the revised claim, and argued that the original proof of claim lacked enough details to notify them about the true nature and extent of 3AC’s allegations. They also held firm that the amendment came too late and should not be allowed. However, the court sided with 3AC by ruling that the amendment was justified given the circumstances.
FTX filed for bankruptcy in November of 2022, and has been aggressively working to recover lost funds. In November 2024, the exchange launched multiple lawsuits, including one against SkyBridge Capital and its founder, Anthony Scaramucci, to reclaim funds that former FTX CEO Sam Bankman-Fried allegedly misused for sponsorship and investment deals. Another legal battle targeted Binance and its former CEO, Changpeng Zhao, seeking to recover $1.76 billion in cryptocurrency sent to Binance as part of a repurchase deal in July 2021.
Texas Court Rules Against Bancor DAO
3AC is not the only company with its hands full legally. A Texas federal judge issued a default judgment against Bancor DAO after the decentralized finance platform failed to respond to an online summons.
Judge Robert Pitman granted the judgment after Bancor DAO’s absence in court after being summoned through a forum post in January of 2024. The ruling was confirmed on March 13 by district court clerk Philip Delvin, who stated that the defendant failed to answer or defend itself in the required timeframe.
The class action lawsuit was filed in May of 2023, and it involves investors who claim they lost tens of millions of dollars due to Bancor’s failure to warn them about liquidity issues during a surge in withdrawals in 2022. Plaintiffs argue that Bancor misled investors about its impermanent loss protection (ILP) mechanism for liquidity providers and that its token functioned as an unregistered security. They claim that Bancor’s ILP was operating at a deficit, and in an attempt to cover its losses, the platform introduced a new product that promised high returns without exposing users to risk.
Impermanent loss happens when liquidity providers in automated market maker models deposit assets into a pool, and the value of one token declines relative to the other. Bancor suspended its impermanent loss protection feature in June of 2022 due to adverse market conditions, which is a move that plaintiffs argue was not properly disclosed to investors.
The lawsuit also contends that Bancor DAO functions as an “unincorporated general partnership” consisting of vBNT tokenholders, making it eligible to be sued as such. While the case was initially dismissed due to the protocol developers being located outside the United States, it was reopened in December. Plaintiffs pointed out that Bancor does not seem to be registered in any jurisdiction and lacks a physical office, mailing address, corporate officers, directors, or appointed agents.
Bancor operates as an on-chain liquidity protocol that is designed for decentralized asset exchanges across multiple blockchains. According to DeFiLlama, the platform currently holds $38 million in total value locked, which is a 98% decline from its peak in May 2021.
This ruling was made after legal precedent from a very similar case in which the Commodity Futures Trading Commission (CFTC) won a default judgment against Ooki DAO. In another related case, a California federal judge ruled in November that DAOs and their governing members could be sued in instances involving unregistered securities.
Bitcoin Mining Dispute Heats Up
Meanwhile, a Delaware court granted a temporary restraining order in favor of Bitcoin miner Consensus Colocation and systems owner Stone Ridge Ventures, preventing hosting provider Mawson Hosting from blocking access to 21,000 mining rigs amid a payment dispute. Vice Chancellor Morgan Zurn issued the order on March 12, barring Mawson from using the hashrate from the miners or restricting Consensus’ access to the facility in Midland, Pennsylvania, until a preliminary injunction hearing.
The dispute centers around alleged unpaid fees, contract terms, and Consensus’ plan to relocate its mining equipment. Consensus claims that Mawson has been operating the rigs for its own gain since Feb. 28 while preventing Consensus personnel from accessing them. Mawson argues it has the right to use the rigs under its agreement with Consensus and claims unpaid fees and electricity prepayments justify redirecting the hashrate.
In a March 6 legal complaint, Consensus accused Mawson of generating daily profits of $100,000 to $200,000 from mining Bitcoin using its $30 million worth of rigs while blocking both physical and digital access. Consensus and Stone Ridge initially signed a colocation agreement with Mawson in December of 2023, with plans to terminate the partnership by March of 2025 and gradually reduce capacity.
Mawson argues that its contract allows for hashrate redirection under specific conditions, but Consensus’ lawyers argue that when Mawson began mining on Feb. 28, the deposit was fully paid. They also allege that Mawson’s actions far exceeded the $17,505.45 in late fees it claims Consensus owes.
For now, the restraining order remains in place while the case moves forward.
This article was originally Posted on Coinpaper.com
