Crypto hedge fund Three Arrows Capital went into liquidation just days after it was accused of defaulting on a multi-million dollar loan to crypto bank Voyager.
Consulting firm Teneo has confirmed that two people from its offices in the British Virgin Islands have been appointed to oversee the liquidation, after Sky News broke the story.
The Singapore-based firm is just the latest victim of a series of financial failures caused by the crypto crash, which began with the collapse of the “algorithmic stablecoin” Terra in May and the failure of the crypto bank Celsius earlier this month.
Three Arrows Capital (3AC) had been deeply invested in a number of struggling cryptocurrency projects, including Terra, as well as Axie Infinity, a “play to win” game that lost nearly $700 million (577 £) due to a North Korean hack last year, and BlockFi, a centralized cryptocurrency exchange that laid off hundreds of employees in mid-June.
He also had large leveraged investments in bitcoin, Ethereum and other cryptocurrency assets, all of which saw drops of up to 60% in the first half of 2022.
Ever since Celsius’ failure triggered the second wave of crypto crashes, rumors have swirled that 3AC, which once managed over $18 billion in assets, was insolvent. Last week, Voyager revealed it had a $650 million outstanding loan to the hedge fund, more than four times its available cash. The bank had to freeze customer withdrawals and take out a multimillion-dollar loan from the founder of the FTX cryptocurrency exchange.
On Monday, Voyager announced that it was formally issuing a notice of default to 3AC “for failure to make required payments on its previously disclosed loan of 15,250 bitcoins and $350 million.”
Stephen Ehrlich, CEO of Voyager, said: “We are working diligently and quickly to strengthen our balance sheet and seek options so that we can continue to meet customer liquidity demands. »
3AC did not respond to a request for comment.
Carol Alexander, professor of finance at the University of Sussex Business School, said the value of investments in decentralized finance (DeFi – the industry term for projects built on top of the crypto asset system) had fallen in recent months. . “The notice of default on Three Arrows served by DeFi platform Voyager yesterday tips Three Arrows into liquidation, and similar hedge funds are expected to follow,” she said.
As 3AC heads into liquidation, CoinFLEX, a crypto exchange, is embroiled in a messy public battle with one of its investors, venture capitalist Roger Ver, known in the industry as “Bitcoin Jesus”. due to its early enthusiastic promotion. of the project. CoinFLEX, which froze customer withdrawals on Friday citing a liquidity crunch, accused Ver of personally owing $47 million to the exchange.
“He breached this agreement and we served notice of default,” said Mark Lamb, CEO of CoinFLEX. “He had a long history of margin building and meeting margin requirements in accordance with this agreement. We frequently spoke to him about this situation in an effort to resolve it. We would still like to resolve it.
In a strangely formatted tweet, Ver denied the accusation and said that CoinFLEX actually owed him money. “Recently there have been rumors that I have defaulted on a debt to a counterparty. These rumors are false. Not only do I have no debt to this counterparty, but this counterparty owes me a substantial sum of money, and I am currently requesting the return of my funds.
In an effort to recover funds, the exchange has issued a new crypto token, which promises to pay a 20% annual interest rate to investors who buy and hold it. The company called the new token “Recovery Value USD”.