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Three Arrows Capital Falls Into Liquidation Amid Worsening Bear Market

Leading crypto hedge fund Three Arrows Capital (3AC) has fallen into liquidation. Sky News reported today, citing a person with direct knowledge of the matter. The source requested to remain anonymous because they do not have the clearance to discuss the matter publicly. According to the source, a British Virgin Islands court ordered the liquidation.

Partners of New York-based Teneo Restructuring will handle the company’s insolvency, the source added. The restructuring company is, however, in the early stages of the liquidation process.

To start with, the firm has taken steps to determine the assets 3AC has. It will then set up a website in a few days and put up instructions on how creditors can get in touch to make claims, according to the source.

Series of Events That Led to 3AC’s Insolvency

3AC’s started after the collapse of the Terra ecosystem in May. The hedge fund had invested approximately $200 million in the Terra ecosystem. Commenting on the implosion ofTerraUSD (UST) and Terra (LUNA), 3AC co-founder Kyle Davies said the Terra Luna situation caught the company very much off-guard.

Before the Terra fiasco could die down, Celsius Network triggered another market crash in mid-June. This crash resulted in stETH de-pegging from Ether (ETH). Notably, 3AC held a massive amount of stETH. The token’s de-pegging further exacerbated 3AC’s problems.

Additionally, 3AC had invested in Grayscale Bitcoin Trust (GBTC), an institutional bitcoin product. With GBTC losing over 61% of its value year-to-date, 3AC liquidity took another massive hit.

3AC’s news of possible insolvency came on June 16 after failing to meet margin calls from its lenders, including BlockFi. As a result, the company faced liquidations worth over $400 million. Soon afterward, the company sought legal and financial advice to work out a solution for its creditors and investors.

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Before these efforts could bear fruit, Voyager issued 3AC a default notice on June 27. Voyager said 3AC defaulted on paying a $350 million loan comprising USD Coin (USDC) and Bitcoin (BTC).

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