What is Three Arrows Capital
Three Arrows Capital, also known as 3AC, was a cryptocurrency hedge fund in Singapore founded by Kyle Davies and Su Zhu in 2012. After continuously being accused of defaulting, it plunged into liquidation on 27 June 2022 and filed for Chapter 15 Bankruptcy on 3 July 2022, which may have a far-reaching impact on the crypto market.
Who founded Three Arrows Capital?
Three Arrows Capital was founded by Kyle Davies and Su Zhu, who studied at Columbia University and later worked at Credit Suisse, a Switzerland-based investment bank. After being set up in 2012, Three Arrows Capital kept focused on foreign exchange derivatives arbitrage until they were cut off by banks in 2017, after which the fund moved its target to the cryptocurrency market.
At the end of 2020, Three Arrows Capital had almost 39 million units of Grayscale Bitcoin Trust (GBTC), an investment product launched by a subsidiary of Digital Currency Group. In 2022, it owned a net asset value of $18 billion, cryptocurrency assets of $10 billion, and almost $200 million in LUNA (currently LUNC) tokens, which collapsed in May 2022.
How did Three Arrows Capital collapse?
Since June 2022, a series of negative news about Three Arrows Capital have been reported. Three Arrows Capital was reprimanded for failing to meet the margin call, and failing to repay the debt to cryptocurrency broker Voyager Digital which declared bankruptcy in July 2022. On 27 June 2022, Three Arrows Capital was ordered to liquidate by a court in the British Virgin Islands. However, Davies and Zhu were reported to not cooperate during the liquidation process and their whereabouts have been unknown since 8 July 2022, leaving a total debt of $3.5 billion to 27 creditors.
What are the impacts of the liquidation of Three Arrows Capital?
The tremendous risk arising from the unpaid debt of $3.5 billion may pass on to the creditors of Three Arrows Capital, such as Blockchain.com, Voyager Digital, and Genesis. It is noted that $2.36 billion of the total debt is owed to Genesis, a subsidiary of Digital Currency Group, which also suffered a great blow in the collapse of FTX.
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