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In a world of crashing crypto, another hedge fund bites the dust.
Ordered to liquidate its assets on the 27th of June 2022 by a court in the British Virgin Islands, 3AC or Three Arrows Capital is one of many crypto funds that had to close its doors to investors and borrowers alike.
Source : Pixabay
While the specifics of how 3AC crashed is unclear, sources show that the company invested heavily in GBTC and Luna, both of which have performed badly.
To understand how 3AC came to this point, we will have to look at…
3AC or Three Arrows Capital, was founded in 2012 by principals Su Zhu and Kyle Davies.
Before 3AC, Su Zhu worked for financial companies like Deutsche Bank and Flow Traders and Kyle Davies worked for Credit Suisse.
The duo specialized in exploiting market inefficiencies.
They got their start by arbitraging the mispriced OTC NDF market in Asia and by making small profits, began to make a name for themselves in the financial world.
According to 3AC’s website, the founders started to get involved with crypto in 2019.
The media section of their website was updated regularly, capturing 3ACs involvement with Bitcoin, Grayscale, Ethereum, Defi, Blockchain etc.
3AC’s crypto investments were in the billions two years later.
In Jan 2021, 3ACs investment in GBTC or the Grayscale Bitcoin Trust was boosted to $1.3 billion.
GBTC is a security where investors could have exposure to bitcoin without the hassle of owning a crypto wallet or to understand cryptocurrencies in depth.
In the beginning of 2021, the shares of GBTC were set for an increase that would set its value at a premium relative to its net asset value. Owning GBTC was good for 3AC initially.
Before the 2nd half of 2021, the stock started to crumble.
In the last 6 months, GBTC has decreased by 61.68% as this article is being written.
Alongside this investment, 3AC owned $559 million dollars’ worth of Luna, a staking coin that would give investors 20%.
After the crash of Terra UST -- Terra’s stable coin -- and Luna, their stake is worth less than $1000.
Owning both of these assets in a market where cryptocurrency prices were plunging meant that any collateral offered in the form of crypto to secure these investments would be worth less, making liquidation less effective.
This may have turned any leverage taken on by 3AC into bad loans.
3AC has filed for Chapter 15 Bankruptcy in a New York court.
The firm also owes payments on a $670 million dollar loan to Voyager Capital, whose stock has plunged by 94%.
The whereabouts of Su Zhu and Kyle Davies are unknown as of now.
Su Zhu’s latest tweet on the 15th of June offers an enigmatic answer to clueless investors and speculators.
“We are in the process of communicating with relevant parties and fully committed to working this out”
This article is sourced from the following links:
Su Zhu | People Directory | CryptoSlate
Three Arrows Boosts Grayscale Bitcoin Trust Holdings to $1.3 Billion - Decrypt
Three Arrows Capital, a crypto hedge fund, in default on $665 million loan - The Washington Post
3AC Files for Bankruptcy as Co-Founders’ Location Unknown - Blockworks
Three Arrows Capital (3AC) faces deadline to repay loans or default (cnbc.com)
BVI court orders liquidation of crypto hedge fund 3AC: Report | Mint (livemint.com)
