Three arrows file for bankruptcy, 9 others under pressure

Troubled crypto hedge fund Three Arrows Capital has filed for bankruptcy in the United States, making it the latest crypto investment company to collapse during this year’s digital asset sales.

The hedge fund, known as 3AC, filed for bankruptcy in Chapter 15 of a federal court in Manhattan on Friday, just three days after it was liquidated in the British Virgin Islands for defaulting on a $ 667 million loan to Voyager Digital.

The

liquidity

The crisis in the crypto ecosystem stems from the dismal performance of cryptocurrencies in 2022, which has seen the leading token bitcoin plummet more than 70% from its highest level in November.

3AC has lost at least $ 400 million during the crash, according to The Block. Its non-repayment of debt has contributed to a broader liquidity crisis that is now rippling through crypto.

“The collapse of Three Arrows Capital has triggered the collapse of many other companies across the crypto area, especially lenders that the hedge fund borrowed from in huge sums,” GlobalBlock analyst Marcus Sotiriou said in a research note on Monday.

Here are the high-profile cryptocurrencies suffering from the ongoing liquidity crisis:

Exchanges

Voyager Digital has suffered after 3AC failed to repay the debt. The stock market now has 685 million dollars in cryptocurrencies, compared to 1.12 billion dollars it has lent, it said on Friday.

To cover its losses, the trading platform secured a line of credit from FTX CEO Sam Bankman-Frieds Alamdeda Ventures amounting to $ 485 million in cash and bitcoin.

After first cutting withdrawal limits from $ 25,000 to $ 10,000, Voyager has now temporarily suspended trading, deposits and withdrawals on its platform.

“This was a hugely difficult decision, but we believe it is the right one given the current market conditions,” Voyager CEO Stephen Ehrlich said in a statement.

Deribit claims in court documents that 3AC has failed to repay a loan of 80 million dollars, the Financial Times reported on Friday. The derivatives exchange said that the crypto hedge fund was one of the first shareholders.

“Due to market developments, Deribit has a small number of accounts that have a net debt to us that we consider to be potentially distressed,” a Deribit tweeted in June.

The crypto exchanges Bancor and CoinFlex are also under pressure from the liquidity crisis.

Bancor said in June that it would suspend one of the investor protection functions, but has no limited withdrawals from any accounts.

Meanwhile, CoinFlex suspended all withdrawals on 23 June. Roger Ver, the crypto evangelist known as ‘bitcoin Jesus’, owes the stock exchange 47 million dollars, it is said, even though Ver denies this.

Crypto-borrowers

Celsius network was one of the earliest victims of the liquidity crisis, when it froze all bank withdrawals and transfers on 13 June, citing “extreme market conditions”.

Three weeks later, the cryptocurrency lender’s customers are still waiting to be notified when they can access their money, and the company has hired financial restructuring advisers. Meanwhile, Goldman Sachs is reportedly trying to raise $ 2 billion to buy assets from the troubled lender at a significant discount.

BlockFi on Friday signed an agreement to give FTX an option to buy the lender for a price as high as $ 240 million, said CEO Zac Prince. tweeted Friday. It also increased the former $ 250 million emergency loan from Bankman-Peace to $ 400 million.

Prince noted that BlockFi is facing a $ 80 million loss from the loan to 3AC, but does not expect any further setbacks, having fully accelerated the loan and liquidated or secured all associated collateral.

Hong Kong-based Babel Finance and Vauld are two other cryptocurrencies that are forced to suspend withdrawals. Vauldbacked by Coinbase Ventures, said Monday it had frozen withdrawals, trades and deposits, and it is now explore restructuring.

More of Babels top employees have quit the lender since it said it was freezing accounts on June 17, according to The Block.

Crypto lender and market maker Genesis faces potential losses of hundreds of millions of dollars, thanks to exposure to 3AC and Babel, CoinDesk reported on Thursday.