Multi-billion Crypto Hedge Fund Ordered into Liquidation


Multi-billion Crypto Hedge Fund Ordered into Liquidation

CRYPTO ─ The world of cryptocurrency seems to be falling apart. From major coins plunging in value in such a short period of time to numerous lay-offs of prominent cryptocurrency firms ─ not to mention the failure of supposedly legacy cryptocurrency projects such as Terra LUNA and Celsius. Alas, despite all of these, the end might not still be in sight as another cryptocurrency firm calls it quits.

The Firm’s Background

Three Arrows Capital (3AC) is a Singapore-based multi-billion cryptocurrency hedge fund founded in 2012 by two former Credit Suisse officials, Su Zhu and Kyle Davies. According to its last public financial statement, the firm was worth $18 billion in Net Asset Value. Meanwhile, according to Nansen, a reputable Blockchain analytics firm, at the end of the first quarter of this year, the 3AC manages cryptocurrency assets worth approximately $10 billion.

The hedge fund is known for its financial backing of numerous high-profile crypto projects, including crypto’s second most valuable coin, Ethereum, and crypto’s ninth most valuable coin, Solana. Other well-known projects 3AC supported include Aave, Avalanche, BlockFi, Deribit, Polkadot, and the WOO Network.

Lastly, its most recent high-profile investment was made in February of this year, when the firm bought $200 million worth of LUNA. Prior to the collapse of LUNA and the subsequent massive downturn of the whole cryptocurrency market, the firm was so optimistic about its growth prospect that in April of this year, it reported that it was planning to move its headquarters from Singapore to Dubai. However, on the 24th of June, a few days from the firm’s liquidation date, the Dubai Financial Services Authority has confirmed that the firm has not pushed through with its pian.

The Downfall of a Giant

On the 27th of June of this year, a court in the British Virgin Islands ordered Three Arrows Capital to cease all of its operations and liquidate its assets. Reports suggest that 3AC suffered heavily from the demise of LUNA, whose value fell to almost zero. Furthermore, the subsequent sell-off in the cryptocurrency market proved to be disastrous as its balance sheet is composed mainly of cryptocurrency assets ─ giving the firm its death sentence.

A few days prior to the eventual liquidation order, on the 16th of June, the Financial Times revealed that the firm did not meet its margin calls. A day after, on the 17th of June, a class-action lawsuit was filed against cryptocurrency firms, including 3AC in the District Court of the Northern District of California.

Afterward, on the 22nd of June, the Wall Street Journal released a report that the firm failed to pay off its due liability from a cryptocurrency broker, Voyager Digital. One of the founders, Davies, replied to the Wall Street Journal in an interview later that week and promised that 3AC was “committed to working things out and finding an equitable solution for all our constituents.”

However, on the 27th of June, the day the liquidation order was released, Voyager Digital issued a Notice of Default against the firm for failing to make the required payment of a total of $665 million in both bitcoin and USD coin loans.

For now, the firm’s position remains gloomy at best, as it is still unclear if it will be able to settle all its liabilities, let alone satisfy all of its stakeholders in its liquidation process. In a grand scheme of things, this unfortunate end added additional downward pressure to the already battered cryptocurrency market.

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