Three Arrows Capital (3AC) Files for Bankruptcy

As another week of harsh cryptocurrency winter draws to a close, multiple important pieces of news have reached the market, bringing clarity to the positions of some major industry players. First, the troubled crypto hedge fund Three Arrows Capital (3AC) is now seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code, which allows foreign debtors to protect US assets, according to Reuters. As reported, a British Virgin Islands court ordered the liquidation of 3AC earlier this week.

Meanwhile, troubled crypto lender BlockFi said it signed definitive agreements, subject to shareholder approval, with the FTX US crypto exchange for:

• A USD 400m revolving credit facility which is subordinate to all client funds, and
• An option to acquire BlockFi at a variable price of up to USD 240m based on performance triggers.

“We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today, across the board for major assets,” Flori Marquez and Zac Prince, BlockFi co-founders, said in a statement.

They admitted that due to their loan to 3AC, the lender experienced USD 80m in losses, and “this represents the full extent of the impact to BlockFi from 3AC.” Also, these losses “will be part of 3AC’s ongoing bankruptcy case(s).”

Meanwhile, another crypto platform that suffered from 3AC, Voyager Digital, said it is “temporarily” suspending trading, deposits, withdrawals, and loyalty rewards.

“This decision gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform we have built together. We will provide additional information at the appropriate time,” Stephen Ehrlich, CEO of Voyager, was quoted as saying in the announcement.

The company’s exposure to 3AC reportedly includes 15,250 bitcoin ($293) and $350 million, while they also have a multi-million line of credit agreement with Alameda Ventures, a quantitative trading firm and the parent company of the FTX exchange.

FTX has become a lender of last resort for several cryptocurrency companies and now its CEO and co-founder Sam Bankman-Fried says he is willing to explore acquisitions in the hard-hit bitcoin (BTC) and crypto mining industries.

“When we think about the mining industry, they do play a little bit of role in the possible contagion spread, to the extent that there are miners that were collateralizing borrows with their mining rigs. There might come along a really compelling opportunity for us — I definitely don’t want to discount that possibility,” he told Bloomberg TV.