Crypto hedge fund Three Arrows Capital is going into liquidation
The large hedge fund for cryptocurrency Three Arrows Capital has fallen into liquidation, a person with knowledge of the case told CNBC, and marked one of the biggest victims in the last so-called “cryptocurrency winter”.
Teneo has been brought on board in recent days to handle the settlement process, said the person who requested anonymity because they were not authorized to discuss the matter publicly.
Sky News first reported on the liquidation history.
Three Arrows Capital, or 3AC as it is also known, did not respond to a request for comment when contacted by CNBC.
Teneo is in the very earliest stages of the liquidation process, the person said. The restructuring company is taking steps to realize the assets 3AC has, then it will set up a website within the next day or two with instructions on how creditors can get in touch to make claims, the source added.
3AC, co-founded by Zhu Su and Kyle Davies, is one of the most prominent crypto hedge funds (focusing on investments in digital assets such as cryptocurrencies) around and is known for its highly leveraged efforts. Zhu has extremely bullish views on bitcoin.
But a decline in digital currency prices, which has seen billions of dollars wiped out of the market in recent weeks, has damaged 3AC and revealed a liquidity crisis in the company.
On Monday, 3AC defaulted on a $ 350 million loan from Voyager Digital in the US dollar-denominated stack coin, USDC, and $ 15,250 bitcoin, worth around $ 304.5 million at current prices.
3AC had exposure to the collapsed algorithmic stablecoin terraUSD and sister token luna.
The Financial Times reported earlier this month that US-based crypto-lenders BlockFi and Genesis liquidated some of 3AC’s positions, citing people familiar with the matter. 3AC had borrowed from BlockFi, but failed to meet the margin requirement.
A margin call is a situation where an investor must commit to more funds to avoid losses on a trade made with borrowed cash.
The closure of 3AC has triggered fears of contagion to parts of the market that could potentially be exposed to the company.
Other cryptocurrency companies have also encountered liquidity problems. The loan company Celsius and the cryptocurrency exchange CoinFlex were forced to pause withdrawals for customers, both with reference to “extreme market conditions”.
However, CoinFlex had another problem with a customer who failed to repay a debt of $ 47 million, which created a liquidity problem for the company.
