Three arrows file for bankruptcy, 9 others under pressure

Struggling crypto hedge fund Three Arrows Capital has filed for bankruptcy in the US, making it the latest crypto investment firm to crash in this year’s digital asset sale.

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

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liquidity

The crisis in the crypto ecosystem stems from the dismal performance of cryptocurrencies in 2022, which saw the major token bitcoin fall more than 70% from its all-time high in November.

3AC lost at least $400 million in the crash, according to The block. Its inability to repay its debts has contributed to a wider liquidity crisis that is now spilling over to crypto.

“The collapse of Three Arrows Capital has caused the downfall of many other companies in the crypto space, especially the lenders from whom the hedge fund borrowed huge sums,” GlobalBlock analyst Marcus Sotiriou said Monday in a research note.

Here are the top crypto players that are suffering during the ongoing liquidity crisis:

Exchanges

digital travel suffered after 3AC failed to repay its debt. The exchange now holds $685 million in crypto assets, up from the $1.12 billion it loaned out, it said on Friday.

To cover its losses, the trading platform obtained a line of credit from FTX CEO Sam Bankman-Fried, Alamdeda Ventures, in the amount of $485 million in cash and bitcoins.

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

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

deribitate claims in court documents that 3AC failed to repay $80 million loan, the Financial Times reported on Friday. The derivatives exchange said the crypto hedge fund was one of its earliest shareholders.

“Due to market developments, Deribit has a small number of accounts that are net indebted to us that we consider potentially distressed,” said one. Deribit tweeted in June.

Crypto exchanges Bancor and CoinFlex are also under pressure from the liquidity crisis.

Banking said in June that it would be pause any of its investor protection featuresbut did not limit withdrawals from any account.

Meanwhile, CoinFlex suspended all withdrawals on June 23. Roger Ver, the crypto evangelist known as “Bitcoin Jesus”, owes the exchange $47 million, he said, although Ver denies it.

Crypto lenders

Celsius Network was one of the first victims of the liquidity crunch, as it froze all account withdrawals and transfers on June 13, citing “extreme market conditions”.

Three weeks later, the crypto lender’s customers are still waiting to hear when they will be able to access their money, and the company has hired financial restructuring advisers. Meanwhile, Goldman Sachs is reportedly trying to raise $2 billion to buy assets from the troubled lender at a steep discount.

BlockFi signed an agreement on Friday to give FTX an option to buy the lender for as much as $240 million, its CEO Zac Prince tweeted friday. He also increased his previous $250 million emergency loan from Bankman-Fried’s company to $400 million.

Prince noted that BlockFi is facing $80 million in losses from its loan to 3AC, but he does not expect further fallout, having fully accelerated the loan and fully liquidated or covered all associated collateral. .

Babel Finance and Vauld, based in Hong Kong, are two other crypto lenders forced to suspend withdrawals. Vaultwhich is backed by Coinbase Ventures, said monday it had frozen withdrawals, trades and deposits, and it is now explore restructuring.

Several of of babel top employees have left the lender since it said it was freezing accounts on June 17, according to The block.

Crypto lender and market maker Genesis faces potential losses of up to hundreds of millions of dollars, thanks to its exposure to 3AC and Babel, CoinDesk reported Thursday.

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