Crypto Hedge Fund Three Arrows Files For US Bankruptcy

Three Arrows Capital has filed for bankruptcy in the United States, highlighting the scale and reach of the prominent crypto investment firm’s loans across the industry before it collapsed into liquidation this week.

The filing for Chapter 15 bankruptcy in Manhattan federal court late Friday came just days after Three Arrows pushed for a liquidation in the British Virgin Islands, following allegations that it failed to pay $80 million owed to Deribit for digital asset exchange. A US bankruptcy petition has been filed to enable attorneys appointed to lead the dismantling of Three Arrows in the British Virgin Islands, the fund’s legal headquarters in Singapore, to protect its US assets.

The failure of Three Arrows that was using borrowing sharpening their bets On cryptocurrencies, it is the latest sign that the turmoil in the digital asset markets this year has badly hurt some of the biggest players in the industry. It also highlights how problems in a company can spread across the sector due to the opaque links between investors, cryptocurrency exchanges and lending firms.

Insolvency specialists at Teneo, the advisory firm Eye in the British Virgin Islands To liquidate Three Arrows, he told the US court he expected a “large number of creditors” to file claims against the hedge fund.

Deribit, a derivatives-focused cryptocurrency trading platform, began liquidation proceedings in the British Virgin Islands last week, and Three Arrows subsequently agreed to put itself under liquidation. However, Three Arrows is also under arbitration in New York with one of its largest creditors, Russell Crumpler, one of the company’s liquidators, in a US court filing.

“With many creditors seeking to enforce their rights to collect debt obligations owed by the debtor, the risk has increased that the debtor will squander its assets without taking into account each individual lender’s ability to recoup its losses,” Krumbler said.

In a sign of Three Arrows’ loan volume, Toronto-listed crypto lender Voyager Digital said in late June that it could lose more than Loans totaling $650 million It was created for a crypto investment company co-founded by Su Zhu and Kyle Davies. Voyager said late Friday that it will suspend withdrawals and trading on its platform as it explores “strategic alternatives.” It added that it was “actively pursuing all available remedies to recover from Three Arrows.”

BlockFi, another major cryptocurrency lender, said on Friday that it is sustainability 80 million dollars in losses Because of the collapse of the three stocks even after decoding some of their positions. On Friday, BlockFi also announced a deal under which FTX will provide new funding in exchange for an option allowing the cryptocurrency exchange to buy the block for $240 million.

Three Arrows is also facing regulatory scrutiny in Singapore. Monetary Authority of Singapore rebuke The group this week for providing false information and breaching an asset below management’s threshold. Authorities in the city state said they have been investigating Three Arrows for a year. The fund was first managed in Singapore before moving its headquarters to the British Virgin Islands in September.

Three Arrows emerged during the climax of the cryptocurrency bull market in November 2021. Zhu put forward the thesis of a “super cycle” wherein increased mainstream adoption means that prices will continue to rise without returning to a bear market in the near term. However, with investors staying away from speculative assets this year, the cryptocurrency market has come under severe pressure. Market Cap of the Top 500 Tokens collapsed From a high of $3.2 trillion last November to less than a trillion dollars.

Three Arrows did not respond to a request for comment on her liquidation. “We are in the process of communicating with interested parties and are fully committed to working on this,” Chu said on Twitter last month.