S'pore-based crypto fund Three Arrows Capital files for bankruptcy in US

Three Arrows Capital is being liquidated after the sharp sell-off in crypto markets. PHOTO: AFP

BENGALURU (REUTERS, BLOOMBERG) - Crypto hedge fund Three Arrows Capital (3AC) is seeking protection from creditors in the United States under Chapter 15 of the US Bankruptcy Code, which allows foreign debtors to shield US assets, according to a court filing on Friday (July 1).

Singapore-based 3AC is one of the highest-profile investors hit by the sharp sell-off in crypto markets and is being liquidated, Reuters reported on Wednesday, citing a person familiar with the matter.

Representatives for 3AC filed a petition in the US Bankruptcy Court for the Southern District of New York on Friday, according to court documents.

On Thursday, Singapore's financial regulator had accused the embattled fund of exceeding its assets threshold and providing false information.

Non-US companies use Chapter 15 to block creditors that want to file lawsuits or tie up assets in the United States.

The meltdown in cryptocurrency deepened in the past week as major players contended with liquidations, withdrawal freezes, trading halts - and, at least in one case, a bailout.

Crypto broker Voyager Digital on Friday announced a suspension of trading, deposits and withdrawals, while BlockFi, a major digital asset lender, won the backing of exchange FTX US with the potential to be acquired. Both companies were upended by the woes of 3AC.

Meanwhile, crypto markets slumped, adding to a decline that has wiped away some US$2 trillion (S$2.8 trillion) of market value.

"I had begun to think that dominoes had stopped falling in mid-June," said Mr Aaron Brown, a crypto investor and Bloomberg Opinion contributor. "I suspect by Tuesday morning, there will be more bad news, although I make no specific predictions."

Much of the industry's recent liquidity issues stem from the troubles at 3AC, which suffered from large losses after making big bullish bets on everything from Bitcoin to Luna, part of the Terra ecosystem whose implosion in May sparked a major market spasm.

Founded in 2012 by former Credit Suisse traders Zhu Su and Kyle Davies, the fund has become emblematic of the industry's excesses during last year's bull run, when it built up leverage that proved destructive when the market turned.

The fuller extent of their impact on the industry is starting to emerge: Blockchain.com and Deribit, a crypto derivatives exchange, this week confirmed that they are among creditors that sought for the liquidation of 3AC.

A spokesman for Blockchain.com said it is cooperating with ongoing investigations into activities by 3AC.

"Crypto is a nascent industry, but intense competition developed amongst service providers vying for the business of a small set of entirely new counterparties," said CoinFund managing partner Alex Felix.

Mr Kyle Samani, co-founder and managing partner at Multicoin Capital, said there is a need for appropriate regulations and transparency, and that an industry coalition should come together to protect retail customers.

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