Crypto Platforms Liquidate
There’s a lot of rumors and speculation surrounding the crypto hedge fund Three Arrows Capital (3AC), and it seems to be affecting other crypto companies as well. Arguably, 3AC’s problems started with its investment into the Terra blockchain, as it purchased $559 million worth of locked LUNA (now luna classic), which is now worth just under $700. The Twitter account called The Defi Edge (@thedefiedge) explained in a Twitter thread that after the Terra fallout, 3AC allegedly tried to get funds back by using more leverage to earn back its Terra investment losses.
Although, markets shuddered even more after the Terra LUNA and UST implosion, causing a significant amount of liquidations across the entire crypto industry. Another account called Degentrading (@hodlkryptonite) said 3AC borrowed from every major lender and the firm faced significant liquidations this week. Furthermore, there’s been speculation that 3AC was dumping a great deal of Lido’s wrapped ether product called stETH, which was putting a burden on the stETH peg. Then a company backed by 3AC called Finblox detailed that it had to pause rewards (up to 90% APY) for all of its users, and the platform upped withdrawal limits as well.
Furthermore, after The Defi Edge finished his Twitter thread, a company (Protocol X) that 3AC invested in and wished to remain anonymous, told The Defi Edge that 3AC was holding the project’s treasury. “3AC invests in different seed rounds of companies. The protocol raises money usually in USDC / USDT. Well, the treasury is usually sitting around doing nothing. So a common deal 3AC did with their protocols is ‘manage’ their treasury,” The Defi Edge wrote. The Twitter account added:
3AC’s Treasury Management. 3AC gave an 8% APR guarantee on the treasury. So protocols would park the funds raised by 3AC + additional parts of their treasury. The protocols felt safe because well…it’s 3AC. Protocol X has mentioned that the ghosting is real. They’ve talked to two other protocols who also mentioned that they’re being ghosted too by them. 3AC now holds part of their treasury, and they have no idea what’s the state of their cash.
Bitmex and Deribit Liquidate 3AC Positions, Co-Founder Kyle Davies Says the Hedge Fund Is ‘Finding an Equitable Solution for All Constituents’
Additionally, a report published by The Block notes that Bitmex liquidated 3AC’s positions but did not disclose how much was liquidated. “This was collateralised debt and did not involve any client funds,” a Bitmex spokesperson told The Block. “We are not going to be like other brands and wax poetic about our limited exposure and strong capital position — instead, we will demonstrate it by providing our users a reliable and liquid trading venue every day, no matter the situation.” On Twitter, the crypto derivatives exchange Deribit also disclosed information about 3AC’s business dealings.
“We can confirm that Three Arrows Capital is a shareholder of our parent company since February 2020,” Deribit said on Thursday. “Due to market developments, Deribit has a small number of accounts that have a net debt to us that we consider as potentially distressed. Even in the event that none of this debt is repaid to us, we will remain financially healthy and operations will not be impacted. We can confirm all customer funds are safe and the full insurance fund will remain intact as is. Any potential losses will be covered by Deribit,” the exchange added.
The same report published by The Block notes that the editorial’s author contacted both FTX and Bitfinex about 3AC dealings as well. FTX told The Block author Yogita Khatri that they do not comment on their customers, and Bitfinex explained that it “had closed its positions at a loss without having to be liquidated,” Khatri’s report details. According to the Bitfinex statement, 3AC has removed all of its funds from the company’s exchange. Since the rumors and speculation started to swirl around 3AC’s business dealings, so far, the public has only heard from the company’s co-founder Su Zhu once on Twitter.
The cryptic tweet doesn’t really get into any specifics, but says: “We are in the process of communicating with relevant parties and fully committed to working this out.” 3AC’s co-founder Kyle Davies has not tweeted since June 9. Davies, however, did speak with the Wall Street Journal (WSJ) and said: “We have always been believers in crypto and we still are. We are committed to working things out and finding an equitable solution for all our constituents.” The WSJ report noted that 3AC was looking for help from “legal and financial advisers” in order to quell the company’s financial burdens.
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