Crypto lender Nexo is trying to dispel any fear of its business suffering due to the potential insolvency of Three Arrows Capital LLC. Furthermore, Nexo allegedly declined to provide a loan to the troubled hedge fund amid mounting speculations about its financial health.
The Downfall of Three Arrows Capital
Singapore-based Three Arrows Capital became the focal point of insolvency speculations as leading crypto lenders liquidated its positions. It all started after a cryptic tweet from 3AC co-founder Zhu Su on Tuesday.
Zhu tweeted that 3AC is committed to “working this out,” without providing any further details. Also, the firm did not immediately agree to comment on this matter.
However, 3AC finally confirmed on Friday of having suffered heavy losses in the recent market downturn. In fact, the firm is now considering selling off its remaining assets and bailing out in fear of potential insolvency.
Nexo Not Exposed To Three Arrows
Affirming its status as “safe” from any upcoming reverberations, Nexo has come out to reveal having no fund exposure to the Singapore-based 3AC.
“We have zero exposure to 3AC,” said Nexo co-founder Antoni Trenchev. “A few years ago they came to us and asked for an unsecured loan, which we did not feel comfortable providing because it goes against our risk-management parameters.”
In fact, Nexo’s only significant association with 3AC is through a partnership with an NFT fund. But as per the statement shared by the company, the collaboration struck in December 2021 did not work as the fund failed to “take off.”
Crypto Firms Distance From 3AC
Crypto industry players are now reassuring clients about their liquidity and exposure to counterparties like 3AC.
Reportedly, crypto exchange BitMEX gave a $6 million secured loan to Three Arrows Capital. But a person familiar with the matter said that the amount is relatively small compared with BitMEX’s financial position.
Meanwhile, crypto lending platform BlockFi reported continuing normal operations. In addition, it has assured that no client funds are impacted to dispel concerns over contagion risks from 3AC.
Additionally, BlockFi has confirmed a large client has failed to meet obligations on an overcollateralized margin loan. CEO Zac Prince said on Twitter that BlockFi has “fully accelerated the loan and fully liquidated or hedged all the associated collateral.”