Three Arrows Capital files for bankruptcy

View of New York

Three Arrows Capital’s Manhattan bankruptcy filing comes just days after the firm was forced into bankruptcy in the Virgin Islands.

(Photo: Reuters)

new York Crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy in New York late Friday. The crypto industry has thus reached a new low.

Three Arrows Capital’s business model was based on borrowing heavily to bet aggressively on cryptocurrencies. But this model only works as long as digital currencies are booming. In the past few months, however, crypto prices have fallen massively, so that there is already talk of a crypto crash.

The most well-known digital currency, Bitcoin, has lost two-thirds of its value from its November peak. The situation is even more dramatic for other currencies. The market value of the top 500 cryptocurrencies has fallen to $1 trillion most recently, from $3.2 trillion in November.

The Three Arrows Capital Funds has been one of the most important players in the crypto world. It was founded by Credit Suisse traders Zhu Su and Kyle Davies and has since managed assets of around $10 billion. This made 3AC the largest crypto hedge fund.

Top jobs of the day

Find the best jobs now and
be notified by email.

The Manhattan bankruptcy filing comes just days after the Virgin Islands firm was forced into bankruptcy after failing to pay its $80 million debt to digital marketplace Deribit. Deribit specializes in derivatives on cryptocurrencies.

Although based in Singapore, Three Arrows Capital has its legal domicile in the British Virgin Islands. With the bankruptcy filing in New York, the lawyers can now wind up the fund in the Virgin Islands.

3AC is also currently unable to repay the loan of 660 million dollars from Voyager Digital. This was announced by the Canadian-based company specializing in loans for crypto providers a few days ago.

“Significant number of creditors”

Bankruptcy trustee Teneo, who is set to handle Three Arrows’ bankruptcy in the Virgin Islands, told the New York court that he expects “a significant number of creditors” to file claims against the hedge fund.

Blockfi, one of the biggest crypto believers, also revealed on Friday that it racked up an 80 million loss due to the collapse of Three Arrows. Blockfi also announced a deal with crypto trading platform FTX on Friday. After that, Blockfi will get fresh capital in exchange for an opportunity to acquire the company for $240 million.

Three Arrows isn’t just struggling in New York and the Virgin Islands. In Singapore, too, the financial supervisory authority is examining the transactions of the hedge fund. The supervisor accuses the fund of having given false information. She shared that she has been investigating the provider for a year.

Initially, Three Arrows was based entirely in Singapore before moving its legal domicile to the Virgin Islands. Last year, when crypto markets were at their peak, the company rose to prominence when Zhu, one of the two founders, fueled the theory of a “super cycle.” He argued that prices will continue to rise as more conventional players such as banks have entered the market.

More: “This is the Lehman moment of the crypto industry” – Here’s what’s next after the Terra crash

source site-11