Venture capital firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, sparking bankruptcy fears after this week’s crypto market crash sparked the Singaporean firm’s unpredictable liquidation.
Cryptocurrency lender BlockFi was among the firms that liquidated at least some of 3AC’s positions, according to the Financial Times. Citing people familiar with the matter, the Financial Times reported that 3AC had borrowed bitcoin (BTC) from lenders but was unable to meet margin calls after the market deteriorated earlier this week.
Issues surrounding 3AC appear to have affected Finblox, a Hong Kong-based platform that allows investors to earn yield on their digital assets. Finblox said it was forced to reduce withdrawal limits on Thursday because of concerns about venture capital firms.
Although estimates vary, 3AC may have liquidated $400 million in multiple positions. 3AC has significant exposure to Terra (originally Luna, now LUNC) and also holds significant positions in projects such as Solana (SOL) and Avalanche (AVAX). As Cointelegraph reported, 3AC has been moving assets over the past few days to replenish funds on various decentralized finance (DeFi) platforms, most notably Aave (Aave).
Three Arrows Capital bought 10.9 million locked LUNA for $559.6 million, now worth $670.45.
Ouch
— Crypto Maxi (@cryptoMaxi420) June 14, 2022
However, this week’s massive liquidations were likely triggered by the collapse of Ethereum (ETH), which plummeted to $1,000, its lowest level since December 2020. It has also been speculated that 3AC’s holdings of synthetic assets, such as Grayscale Bitcoin Trust (GBTC) and Lido’s pledged ETH (stETH), were also responsible for the mass liquidation event.
Rumors of 3AC's bankruptcy have swirled in recent days, with the company's outspoken co-founder Su Zhu posting a vague tweet saying the company is working with "relevant parties" to resolve the issue.
We are in communication with relevant parties and are fully committed to resolving this issue
— Zhu Su (@zhusu) June 15, 2022