Three Arrows Capital (3AC) was liquidated after they were unable to pay back creditors. The huge leverage they had on Luna played a significant part in this liquidation ordered by the court of the British Virgin Islands. 3AC’s problem began when Voyager Digital announced that the company hadn’t paid around $665 million in loan to them.
3AC’s liquidation
A global advisory firm, Teneo, will be managing the liquidation of the company on orders from the court. Their two senior members are appointed for the task. The firm plans to set up a website in the upcoming weeks where creditors can submit their claims. At the same time, they will be given access to information on the company’s liquidation. However, it is difficult to say whether the liquidation will be able to pay off all the debt 3AC has racked up.
Warning by FTX CEO
Sam Bankman recently warned that some platforms are already too far gone and cannot be saved. This comes after he helped Voyager Digital and BlockFi with $500 million and $250 million credit lines, respectively, due to their exposure to 3AC. He is also using the bear market as an opportunity to invest in more crypto businesses that look promising. However, there is a lot of company with holes in their balance sheet and high leverage. They cannot be saved, and it doesn’t even make sense to do so as well.
About Three Arrows Capital
Three Arrows Capital was founded by Kyle Davies and Su Zhu in 2012. Aave, Avalanche, BlockFi, Deribit, Ethereum, Polkadot, Solana, and WOO Network were among the projects the company supported. They also controlled about 39 million units of Grayscale Bitcoin Trust (GBTC) at the end of 2020, according to a January 2021 SEC filing.
In February 2022, the company made an estimated $200 million investment in LUNA tokens. That’s where things went sour. First, the investment reaped a lot of benefits. However, the sudden crash of Luna and UST has led to the recent liquidation of 3AC. The overall downtrend of the crypto market also had a role in this.
What are your thoughts as Three Arrows Capital gets liquidated? And do you think it shows why leverage is a problem in the crypto industry? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
Also Read: Microstrategy stacks $10 million in Bitcoin as speculators talk about liquidation.
