Three Arrows Capital (3AC) defaulted on a loan worth over $670 million. Voyager Digital, a digital asset brokerage, issued a notice stating that 3AC failed to repay a loan of $350 million in the US dollar-pegged stablecoin USDC and 15,250 Bitcoin – worth about $323 million.
The crypto hedge fund is on the brink of insolvency following weeks of turmoil in the crypto market. The world’s most preferred cryptocurrencies Bitcoin and Ethereum are trading slightly lower in the last 24 hours, well off their all-time highs. Voyager intends to pursue recovery from 3AC. It pointed out that the fund continues to operate and fulfill customer orders and withdrawals. This may be an attempt to contain the fear of contagion through the wider crypto space.
Stephen Ehrlich, the CEO of Voyager, said they are working diligently and expeditiously to strengthen their balance sheet and pursue options to continue to meet customer liquidity demands. Voyager said it has about $137 million in US dollars and owned crypto assets. It also has access to $200 million in cash and a USDC revolver, as well as a 15,000 Bitcoin ($318 million) revolver from Alameda Ventures.
3AC’s problems began earlier this month after its co-founder Zhu Su tweeted a cryptic message that the company is “in the process of communicating with relevant parties” and is fully committed to working this out. Last year, Zhu had said that Bitcoin could be worth $2.5 million per coin. But this year, the crypto market saw a major meltdown. Furthermore, 3AC has been unable to meet its margin call. Analysts attribute the fund’s collapse to its exposure to LUNA.
Kyle Davies, co-founder at 3AC, in an interview with the Wall Street Journal revealed that the Terra-LUNA situation caught the fund off guard. 3AC has borrowed large sums of money from various companies. It’s known to have invested in a number of different digital asset projects.