Three Arrows Capital goes into liquidation after crypto crash

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Three Arrows Capital plunged deeper into financial turmoil on Wednesday after a court in the British Virgin Islands ordered the crypto-focused hedge fund to be liquidated over its failure to pay creditors the value of bitcoin and other crypto. – currencies having plunged.

The liquidation order comes after a high-profile notice of default: On Monday, crypto broker Voyager Digital announced that Three Arrows Capital had failed to make required payments on a loan worth more than $665 million , partly paid in bitcoin.

Two senior members of global consultancy Teneo have been appointed by the court to help manage the liquidation, according to a person familiar with the matter who spoke on condition of anonymity because they were not authorized to discuss the process publicly . In the coming days, Teneo will have a website that will allow potential Three Arrows Capital creditors to submit claims and receive more insolvency information, the person said.

Crypto hedge fund Three Arrows Capital defaults on $665 million loan

Teneo and Three Arrows Capital did not immediately respond to a request for comment.

Escalating financial turmoil marks the latest setback for the crypto industry. Faced with crashing token prices, abrupt layoffs, emboldened criticism, and a high-inflation economy that has forced the Federal Reserve to aggressively raise interest rates, the sector is grappling with a harsh “crypto winter” .

Sky News first broke news of the liquidation order on Wednesday.

Three Arrows Capital was established in 2012 by Su Zhu and Kyle Davies, and is known for its bullish moves in crypto. But signs of trouble surfaced in May when Su publicly admitted that his thesis on escalating crypto prices was “unfortunately false.” Then, in a cryptic tweet earlier this month, he said, “We are communicating with affected parties and are fully committed to resolving this issue,” without giving any relevant details. A few days later, the FinancialTimes reported that Three Arrows Capital failed to respond to requests from lenders to show additional funds after its crypto bets went bankrupt.

Before the crypto markets experienced their final plunge, the company claimed around $3 billion in assets under management, Davies told The Wall Street Journal earlier this month.

The high level of interconnectedness in the industry has also sounded the alarm. Many companies are borrowing from and investing in each other, amplifying the risks for investors, as a potential default by one crypto firm could force others to collapse.

Crypto investors in recent months have suffered staggering losses. Bitcoin, the top cryptocurrency, hovered around $20,000 — briefly falling below that threshold on Wednesday — and has lost more than two-thirds of its value since peaking at nearly $69,000. in November. And while the total market for all cryptocurrencies was nearly $3 trillion last year, it has since dropped to less than $1 trillion.

The staggering losses have drawn the attention of political leaders and regulators, who have raised concerns about the lack of financial oversight and investor protection in the sector. Earlier this month, the Celsius Network, a cryptocurrency bank, began halting withdrawals from its nearly 2 million depositors due to what it called “extreme market conditions”. Since then, securities regulators in at least five states have launched investigations into the bank’s operations.

The sharp decline in the crypto world coincides with a sour mood on Wall Street, where the S&P 500 has lost around 20% of its value this year and many observers are bracing for a possible recession. Investors, adjusting to the Fed’s aggressive measures to cool the economy, are fleeing more speculative assets for safer bets. Historically high inflation and war in Ukraine are also compressing consumers and global supply chains, adding to a tougher economic environment, in stark contrast to the exuberance that launched cryptocurrencies and cryptocurrencies. old financial markets to new highs last year.

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