LONDON (BLOOMBERG, REUTERS) - Crypto hedge fund Three Arrows Capital (3AC) has entered liquidation, a source familiar with the matter told Reuters on Wednesday (June 30), in the latest sign of the market downturn hurting the crypto industry.
Singapore-based 3AC is one of the higher-profile crypto investors to have run into difficulties following the sharp sell-off in the market for digital currencies seen in recent months.
Crypto broker Voyager Digital issued 3AC with a default notice on Monday after it failed to make payments on a loan of 15,250 bitcoin (approximately US$324 million) and US$350 million worth of USDC, a stablecoin.
A court in the British Virgin Islands, where 3AC’s fund is incorporated, issued the liquidation order on Monday. The Commercial Court there orders a company to be liquidated if it is regarded as insolvent because it cannot pay its debts. Companies can also voluntarily liquidate, though that is less common.
The court has appointed two partners at consulting and advisory firm Teneo to handle the liquidation, according to a source familiar with the matter.
Teneo will oversee talks with potential buyers that may be interested in 3AC’s remaining holdings, such as tokens or equity stakes in crypto start-ups, the source added.
A website will be set up to locate creditors and determine who is owed what. 3AC has invested in a range of decentralised finance platforms such as Aave and dYdX, as well as crypto infrastructure firms such as StarkWare, according to its website. It is not immediately clear what or how much of these holdings will be subject to a sale.
The court order brings down the curtain on one of crypto’s most famous hedge funds, founded by former Credit Suisse traders Zhu Su and Kyle Davies at the kitchen table of their apartment in 2012.
Their fortune rose along with the crypto market bull run, and 3AC’s assets under management were estimated to be about US$10 billion in March, according to blockchain analytics firm Nansen.
In April, Mr Zhu said the fund is planning to move its headquarters to Dubai from Singapore.
3AC has become emblematic of the industry’s excesses during last year’s bull run, when firms built up the leverage that hobbled them as the market turned.
This month, a cryptic tweet from Mr Zhu hinted at 3AC’s reversal of fortune and growing plight, setting off a market spasm.
The liquidation of 3AC “will present a setback to the industry’s policy efforts and ongoing engagement in DC”, said Mr Ryan Selkis, co-founder of Messari, a crypto data and research platform.
“Many of the centralised institutional leaders in the space had poor risk controls, and put customer funds at risk.”
The fund’s liquidity crunch is among a series of crises that rippled through the battered crypto sector during this year’s downturn, including the implosion of the TerraUSD stablecoin and liquidity issues at lenders Celsius Network and Babel Finance.
3AC’s woes have hit firms such as Voyager Digital.
Earlier, crypto lender BlockFi and prime brokerage Genesis said they had to liquidate one of their large counterparties recently, without naming the counterparty.