Crypto hedge fund Three Arrows Capital which files for bankruptcy in U.S. triggers downfall of many other companies across the crypto space


By George Glover, market business insider

4th July 2022 – (New York) Troubled crypto hedge fund Three Arrows Capital has filed for bankruptcy in the U.S., making it the latest crypto investment firm to collapse during this year’s digital asset sell-off.

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

The liquidity crisis in the crypto ecosystem stems from cryptocurrencies’ dismal performance in 2022, which has seen leading token bitcoin plummet more than 70% from its all-time high in November.

3AC has lost at least US$400 million during the crash, according to The Block. Its failure to repay its debts has contributed to a broader liquidity crisis that’s now rippling through crypto.

“The collapse of Three Arrows Capital has triggered the downfall of many other companies across the crypto space, particularly lenders who the hedge fund borrowed from in enormous sums,” GlobalBlock analyst Marcus Sotiriou said in a research note Monday.

Here are the high-profile crypto players that are suffering during the ongoing liquidity crunch:

Voyager Digital has suffered after 3AC failed to repay its debt. The exchange now holds $685 million in crypto assets, compared with the $1.12 billion it has loaned out, it said Friday.

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

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

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

Deribit claims in court filings that 3AC has failed to repay a loan of US$80 million, the Financial Times reported Friday. The derivatives exchange said the crypto hedge fund was one of its initial shareholders.

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