Three Arrows Capital Confirms Heavy Losses, Considers Asset Sales, And Bailout

Cryptocurrency hedge fund Three Arrows Capital Ltd confirmed Friday it had suffered heavy losses in the recent market downturn.

Bishal Kumar Chanda3 min read
Three Arrows Capital Confirms Heavy Losses, Considers Asset Sales, And Bailout

Cryptocurrency hedge fund Three Arrows Capital Ltd confirmed Friday it had suffered heavy losses in the recent market downturn. Furthermore, the firm is considering selling off its remaining assets and bailing out as it grapples with the potential of insolvency.

According to The Wall Street Journal's report on Friday, the firm has hired legal and financial advisors to figure a way out. Co-founder Kyle Davies said, "We are committed to working things out and finding an equitable solution for all our constituents,"

Meanwhile, 3AC is just looking to buy more time by discussing a tentative agreement with existing creditors. Davies revealed the company has several options on the table, like selling assets and using a rescue package by another firm.

However, still believing in the future of crypto, Davies disclosed to what extent 3AC participated in the $1 billion token sales issued by Luna Foundation Guard. "The Terra-Luna situation caught us very much off guard," Davies told The Wall Street Journal. Reportedly, 3AC bought around $200 million in LUNC (previously LUNA) tokens during the sale.

Luna Foundation Guard is a nonprofit organization set up in February this year to defend the Terra ecosystem's stablecoin peg. Apart from Three Arrows Capital, its token sale had participation from venture firms like DeFiance Capital, Republic Capital, and GSR.

Three Arrows Capital's LUNA investment

Earlier this week, a Terra Community Forum member revealed that 3AC had bought around 10.9 million locked LUNC worth nearly $560 million. But the position is currently worth less than $1,000.

Besides being exposed to the Terra ecosystem collapse, Three Arrows Capital incurred massive liquidations across multiple positions this week. The liquidations came after the Bitcoin and Ethereum prices plunged to their lowest levels since December 2020.

The Three Arrows Capital became the center of insolvency speculations as several leading crypto exchanges liquidated the fund's position. According to Cointelegraph's report on Thursday, 3AC failed to meet margin calls from a group of lenders, including BlockFi. That resulted in these firms liquidating at least some of 3AC's positions.

On Thursday, BlockFi CEO Zac Prince tweeted that his firm liquidated collateral against a loan to a large client. But he didn't name Three Arrows Capital. "We fully accelerated the loan and fully liquidated or hedged all the associated collateral," Zac added.

While Celsius was the first crypto lending platform to signal the ongoing crypto lending crisis, other firms are following suit. To date, several crypto firms have taken similar steps as Celsius, freezing user withdrawals or limiting them. In connection with 3AC, Finblox also made a similar move on Thursday by restricting withdrawals to $1,500.

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