By
Mayowa Adebajo
April 11th, 2024
As 3AC is standing a risk of going bankrupt, its lenders started liquidating the firm’s positions and portfolio companies began distancing themselves.
Singapore-based cryptocurrency hedge fund Three Arrows Capital (3AC) has failed to make a payment of the loan worth more than $670 million. As a result, crypto-asset broker Voyager Digital issued a notice of default to 3AC. According to Voyager Digital’s statement, the company borrowed as much as $350 million in USDC and 15,250 BTC (approximately $324 million). Currently, the broker is trying to pursue recovery from 3AC and discussing possible solutions with its legal advisors.
Voyager Digital CEO Stephen Ehrlich said:
“We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands.”
By June 24, 3AC was expected to make a repayment of $25 million in USDC, with a subsequent request for repayment of the entire amount owed in crypto-assets by June 27, 2022. However, neither of these amounts have been paid.
As a result, the default notice and strengthening claims that 3AC is insolvent came. But considering the exposure of Voyage Digital to 3AC, the firm stated it is “unable to assess at this point the amount it will be able to recover from 3AC.”
Earlier, Voyager Digital secured credit from Alameda Research, Bankman-Fried’s quantitative research. The $500 million in financing consisted of a $200 million credit line of cash and USDC stablecoins, as well as a 15,000 BTC worth approximately $300 million at that time.
What Is the Future of Three Arrows Capital?
Three Arrows Capital has been one of the biggest venture capital firms in the digital currency ecosystem focused on providing superior risk-adjusted returns. Lately, the company has been heavily investing in crypto assets, being the largest holder of a few coins and tokens that are down nearly 90% from their all-time highs, including Terra (LUNA), Solana (SOL), Avalanche (AVAX), and Axie Infinity (AXS). As a result of the crypto winter, 3AC failed to meet margin calls.
Rumors about 3AC being insolvent appeared. Further, its lenders started liquidating the firm’s positions and portfolio companies began distancing themselves. For example, BitMEX liquidated Three Arrows Capital positions. Meanwhile, staking platform Finblox reduced customer withdrawal limits.
According to 3AC co-founder and CEO Su Zhu, the firm is “in the process of communicating with relevant parties and fully committed to working” out its survival model post liquidation.
Obviously, 3AC is standing the risk of going bankrupt. Its current options are asset sales and a rescue by another firm to avoid collapse. 3AC has not provided any comments on the default notice by Voyager Digital. The latter declined to comment on the news as well.