Key Takeaways
- • Three Arrows Capital (3AC), a prominent Singapore-based crypto hedge fund, has entered liquidation, according to a person with knowledge of the matter who spoke to CNBC; Teneo Restructuring has been brought in to manage the process.
- • 3AC defaulted on a loan from Voyager Digital on Monday, June 27, consisting of $350 million in USDC and 15,250 bitcoin, worth about $304.5 million at prevailing prices.
- • The fund's highly leveraged positions, including exposure to the collapsed TerraUSD and LUNA tokens, were undone by a slump in digital asset prices that has erased billions of dollars from the market in recent weeks.
- • BlockFi and Genesis liquidated some of 3AC's positions after the fund failed to meet margin calls, according to the Financial Times, raising contagion concerns across crypto lending and trading counterparties.
- • A British Virgin Islands court ordered the fund's liquidation on June 27, 2022, per reports cited by the publisher's context.
Summary
Three Arrows Capital, one of the most prominent cryptocurrency hedge funds, has fallen into liquidation, a person with knowledge of the matter told CNBC on June 29, 2022. The firm, co-founded by Zhu Su and Kyle Davies, is known for highly leveraged bets on digital assets, and Zhu has been publicly bullish on bitcoin. The restructuring firm Teneo was brought on board in the last few days to handle the process. According to the source, Teneo is in the very early stages, first realizing the fund's assets before establishing a website within a day or two with instructions for creditors to submit claims. Sky News first reported the liquidation. 3AC did not respond to CNBC's request for comment.
The collapse follows a sharp fall in digital currency prices that has wiped billions of dollars off the market in recent weeks, exposing a liquidity crisis at the fund. On Monday, 3AC defaulted on a loan from Voyager Digital comprising $350 million in USDC and 15,250 bitcoin, valued at about $304.5 million at that day's prices. The fund also had exposure to the collapsed algorithmic stablecoin TerraUSD and its sister token LUNA. The Financial Times reported earlier in June that U.S.-based lenders BlockFi and Genesis had liquidated some of 3AC's positions after the fund was unable to meet a margin call on its BlockFi borrowings.
The unwinding has raised contagion concerns across parts of the market with potential exposure to the firm. Other crypto companies have also faced strain: lender Celsius and exchange CoinFlex paused customer withdrawals citing extreme market conditions, and CoinFlex separately faced a liquidity problem after a customer failed to repay a $47 million debt. Additional reporting from Reuters and the Wall Street Journal indicated that liquidators had received approval to claim U.S. assets, and that a court ordered the liquidation while the fund considered asset sales and a potential bailout.
The collapse follows a sharp fall in digital currency prices that has wiped billions of dollars off the market in recent weeks, exposing a liquidity crisis at the fund. On Monday, 3AC defaulted on a loan from Voyager Digital comprising $350 million in USDC and 15,250 bitcoin, valued at about $304.5 million at that day's prices. The fund also had exposure to the collapsed algorithmic stablecoin TerraUSD and its sister token LUNA. The Financial Times reported earlier in June that U.S.-based lenders BlockFi and Genesis had liquidated some of 3AC's positions after the fund was unable to meet a margin call on its BlockFi borrowings.
The unwinding has raised contagion concerns across parts of the market with potential exposure to the firm. Other crypto companies have also faced strain: lender Celsius and exchange CoinFlex paused customer withdrawals citing extreme market conditions, and CoinFlex separately faced a liquidity problem after a customer failed to repay a $47 million debt. Additional reporting from Reuters and the Wall Street Journal indicated that liquidators had received approval to claim U.S. assets, and that a court ordered the liquidation while the fund considered asset sales and a potential bailout.
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