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The prominent crypto hedge fund, Three Arrows Capital (3AC) has finally veered into liquidation as it is notably unable to meet up with its debt obligations.
As reported by Sky News, the liquidation of Three Arrows Capital was ordered by a court in the British Virgin Islands, a verdict that underscores the gravity of the instability in the crypto ecosystem as of today.
Teneo Restructuring Limited has been assigned to help handle the liquidations according to insiders who spoke to CNBC on the conditions of anonymity. The sources claim the Teneo team is currently at the early stages of the liquidations process and is determining what assets the embattled hedge fund has.
Once this is done, the consulting firm will set up a website within the next couple of days with instructions on how 3AC’s creditors can come for claims.
Three Arrows Capital is one of the biggest hedge funds and investors in the digital currency ecosystem. Besides being known for making high leveraged trades, the company, founded by Su Zhu and Kyle Davies typically backs crypto projects and startups as investors. The major cracks in 3AC became obvious when Terraform Labs’ LUNA and UST stablecoin collapsed, two coins to which 3AC reportedly has a very huge exposure.
The collapse fueled the unprecedented fall in the broader digital currency ecosystem which has, in turn, showcased the liquidity troubles for the Singapore-based company. A lot of lending platforms and trading exchanges have already liquidated 3AC with the latest being Voyager Digital which issued a notice of default to the company earlier this week.
Voyager Digital which is battling a liquidity crisis of its own said 3AC had defaulted on a loan worth $350 million in the U.S. dollar-pegged stablecoin, USDC, and 15,250 Bitcoin (BTC), worth approximately $304.5 million at today’s prices.
Three Arrows Capital Liquidation May Trickle Down
That Three Arrows Capital is undergoing liquidity, hence the end of its reign, does not imply that it is alone on this journey. Major crypto lending platform, Celsius Network has also been advised to declare bankruptcy following the halt of withdrawals earlier this month citing harsh economic conditions as the reason.
While the crypto lender is pushing back against this recommendation, BlockFi has almost escaped liquidation as it recently took a $250 million bailout fund from FTX Derivatives Exchange which it plans to use to keep its operations running.
No one knows how long the crypto winter is going to last, but a lot of firms in the digital currency ecosystem have been taking necessary precautions to cut costs in a bid to stay afloat. Staff retrenchment has been a major trend to meet this obligation, and Gemini, Bybit, and Coinbase Global Inc (NASDAQ: COIN) are among the few firms that have cut a significant percentage of the staff over the past month.