Court ordered liquidation of Three Arrows Capital

A court based in the British Virgin Islands has ordered the liquidation of Singapore-based cryptocurrency hedge fund Three Arrows Capital (3AC).

As reported by Sky News on Wednesday (29), the company’s insolvency is being handled by the global consultancy Teneo Restructuring, based in New York.

Liquidation of Three Arrows Capital

A court document was prepared on June 27, requesting the liquidation of the company. It is unclear what the immediate financial implications will be for Three Arrows’ creditors.

A company’s liquidation order means that it must go out of business due to its inability to pay debts and fulfill other financial obligations. When this occurs, the company’s assets are put up for sale to repay creditors with outstanding loans.

Founded in 2012 by Su Zhu and Kyle Davies, Three Arrows Capital has grown into one of the largest cryptocurrency hedge funds. However, the company was heavily impacted by the recent crypto market slump.

In the month of May, the fund suffered significant losses during the collapse of the Terra ecosystem. This is because the fund invested massively in the native token LUNA, which ended up going to zero after the collapse of the stablecoin UST.

3AC lost about $200 million after the project collapsed. When that occurred, Davies told the Wall Street Journal that “the situation of Terra caught them very off guard.”

In mid-June 3AC suffered liquidations in the order of US$ 400 million, including by BlockFi, FTX, BitMEX and others. As a result, the company began to face a potential risk of insolvency.

This week cryptocurrency exchange Voyager Digital issued a warning to 3AC after the fund failed to repay a loan of 15,250 BTC and an additional $350 million in USDC. That is, a total of more than US$ 650 million.

In addition to Voyager, there would also be another loan taken out with the company BlockFi, which 3Ac would not be able to comply with, according to some inside sources. 

Now, the liquidation of one of the most influential cryptocurrency companies could cause more problems for the cryptocurrency industry, which is already struggling to recover after a string of bad news.