The crypto hedge fund Three Arrows Capital has been lined up for liquidation just days after it was accused of defaulting on a multimillion dollar loan to the crypto bank Voyager.
The consultancy firm Teneo confirmed that two individuals from its British Virgin Islands offices had been appointed to oversee the liquidation, after Sky News broke the story.
The Singapore-based firm is just the latest casualty in a string of financial failures caused by the crypto crash, started by the collapse of the “algorithmic stablecoin” Terra in May and the failure of the crypto bank Celsius earlier this month.
Three Arrows Capital (3AC) had been deeply invested in a number of troubled cryptocurrency projects, including Terra, as well as Axie Infinity, a “play to earn” game that lost almost $700m (£577) to a hack from North Korea last year, and BlockFi, a centralised cryptocurrency exchange that laid off hundreds of staff in mid-June.
Three Arrows Capital (3AC) had been deeply invested in a number of troubled cryptocurrency projects, including Terra, as well as Axie Infinity, a “play to earn” game that lost almost $700m (£577) to a hack from North Korea last year, and BlockFi, a centralised cryptocurrency exchange that laid off hundreds of staff in mid-June.
Additionally, it has sizable leveraged investments in cryptocurrencies like bitcoin, ethereum, and others, all of which saw declines of up to 60% in the first half of 2022.
There have been rumors that 3AC, which formerly managed more than $18 billion in assets, is insolvent ever since the fall of Celsius signaled the start of the second wave of the cryptocurrency crash. Voyager disclosed this week that it owed the hedge fund $650 million, more than four times its cash on hand. The bank was forced to halt customer withdrawals and obtain a multimillion-dollar loan from the FTX exchange’s creator.
Voyager made the formal announcement on Monday that it was sending 3AC a notice of default for failing to make the necessary payments on its previously revealed loan of 15,250 bitcoin and $350m”.
Stephen Ehrlich, chief executive officer of Voyager, said: “We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands.”
Carol Alexander, professor of finance at the University of Sussex Business School, said the value of investments in decentralized finance (DeFi – the industry term for projects built on top of the crypto asset system) had plummeted in recent months. “The default notice on Three Arrows served by DeFi platform Voyager yesterday is tipping Three Arrows into liquidation, and similar hedge funds are likely to follow,” she said.
In an oddly formatted tweet, Ver denied the accusation, and said that CoinFLEX actually owed him money. “Recently some rumors have been spreading that I have defaulted on a debt to a counter-party. These rumors are false. Not only do I not have a debt to this counter-party, but this counter-party owes me a substantial sum of money, and I am currently seeking the return of my funds.”
In an effort to recover funds, the exchange has issued a new crypto token, which it promises will pay an annual interest rate of 20% to investors who buy and hold it. The company called the new token “Recovery Value USD”.
