Three Arrows Capital, the crypto hedge fund is knee-deep in debt, and the long list of creditors only makes the bleak situation even bleaker. 3AC’s fall from glory was rather shocking and appalling because as Professor Nik Bhatia stated, “3AC was supposed to be the adult in the room.” It looks like even adults can make mistakes, rather big ones at that. The reasons for the downward spiral are many. The first and foremost is the most generic one, the uncertainty and the grey cloud that has been haunting the crypto market. This might have adversely affected the assets of the hedge fund. Hence started 3AC’s descent from managing assets worth $10 billion to complete zero.
The What And Why
Three Arrows Capital is burdened with a debt worth $3.5 billion. The list of creditors includes Blockchain.com, Voyager Digital, and Genesis Global Trading. This is according to the court documents. The affidavits detailing the bankruptcy and liquidation were filed on the 7th of July. On Monday, these were made public by Teneo. Teneo is the firm that was hired to oversee and coordinate the liquidation process. According to the court filings, 3AC was unable to repay loans in addition to missing multiple margin calls. This led to the investment accounts falling beyond the required levels.
Of all the creditors, Three Arrows Capital owes the most to Genesis, the parent company of Digital Currency Group. As per the records, the company had loaned a whopping $2.36 billion to Three Arrows Capital with a margin requirement of about 80 percent.
The gravity of the situation and the desperate plight of the hedge fund is reflected in the court filings themselves which run up to 1000 pages. “3AC is insolvent and should be wound up” echoes frequently in the filings. The cherry on top of the whole matter is the news that the founders used the borrowed funds for personal requirements. The court filings for instance state the possibility of the founders’ Shu Zu and Kyle Davis using the borrowed funds to purchase a yacht worth $50 million. In addition to this, multiple real estate investments under the name of Su Zhu’s child and wife were revealed by the filings.
According to Russell Crumpler. Senior Managing Director, Teneo,
“At this stage, it is unclear how the assets of the company were dealt with by its founders and whether the assets of the company were used toward the purchases that they have been making.”
3AC’s fall from glory began with the crash of the Terra blockchain which resulted in a long line of liquidations, bankruptcies, and financial complications.
JUST IN: Court filings reveal Celsius Network lent $75 million to Three Arrows Capital.
— Watcher.Guru (@WatcherGuru) July 18, 2022
Three Arrows Capital borrowed $2.36 billion under-collateralized from Genesis.
— Dylan LeClair 🟠 (@DylanLeClair_) July 18, 2022
Three Arrows Capital was one of the biggest crypto hedge funds, at one point managing over $10 billion in capital—
Until the founders dropped off the map.
A 1000-page legal document came out today, bringing clarity to the case.
I went through it. This is what I found:
— Jack Niewold (@JackNiewold) July 18, 2022
JUST IN: A New York judge has frozen the assets of Three Arrows Capital as crypto firm's founders remain underground.
— unusual_whales (@unusual_whales) July 13, 2022
💸 Three Arrows Capital Ordered to Liquidate – what this could mean for these assets.
— Far From All Time High (@FarFromAth) July 19, 2022
⚡️The creditors of the Three Arrows Capital fund said in a lawsuit that the whereabouts of the hedge fund's founders are still unknown.
In the meantime, 3AC's assets in the form of NFTs have been moved to new wallets.
— RALVΞRO (@Ralvero) July 11, 2022
BREAKING: Hunter Biden stands to lose $80 billion from unsecured loans he made to embattled crypto hedge fund Three Arrows Capital with the support of the US Treasury, in documents reviewed by InfoWars Media Inc
the swamp runs deep!!!
— Karl Smith, CFA (Level 1 Candidate) (@wallstreetkarl) July 9, 2022