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Three Arrows files for Chapter 15 bankruptcy in New York

Three Arrows
TL;DR Breakdown
  • Three Arrows, the mega crypto hedge fund, has filed for creditors’ protection under Chapter 15 of the U.S. Bankruptcy Code.
  • Voyager Digital suspends trading, deposits, and withdrawals as a result of the bad debts from Three Arrows. 
  • Nansen estimates that 3AC had $10 billion in assets as of April, but the petition claims it had less than $3 billion.

Three Arrows Capital, a cryptocurrency hedge fund, has filed for Chapter 15 bankruptcy. The action of this plan protects its U.S. assets while the British Virgin Islands are liquidated. The 3AC firm has obtained bankruptcy protection under Chapter 15 of the U.S. Bankruptcy Code. Furthermore, foreign debtors are entitled to declare bankruptcy in the United States if they meet specific requirements.

Three Arrows, the mega crypto hedge fund, files for bankruptcy

According to a court document published Friday, the bankruptcy petition was filed in New York on behalf of Three Arrows. In the United States, Chapter 15 bankruptcies prohibit creditors from seizing a firm’s assets.

The 3AC, a Singapore-based firm known for its investments in crypto and blockchain companies, has been hit hard by the crypto market slump. Three Arrows is expected to be liquidated as a result of the long and severe crypto winter. On Tuesday, a British Virgin Islands court ruled that Three Arrows Capital should be liquidated.

The fund, helmed by former Credit Suisse traders Zhu Su and Kyle Davies, had about $10 billion in assets under management. While Nansen, a blockchain analytics firm, has said that 3AC had $10 billion in assets as recently as April, the petition claims that just $3 billion was kept at the same time.

A bankruptcy petition was submitted to the U.S. Bankruptcy Court for the Southern District of New York by 3AC’s representatives. The law firm Latham & Watkins is representing Three Arrows in the company’s bankruptcy proceedings in the United States.

According to reports, Singapore’s financial regulator charged the failing fund with exceeding its assets threshold and providing false information. Non-U.S.-companies employ Chapter 15 to prevent creditors from bringing lawsuits or seizing assets in the United States.

In its appeal, Three Arrows claimed:

The Debtor faces litigation and other demands on payment that it cannot meet, and the Debtor is at significant risk of the diminution in value of its assets without immediate relief imposing a stay of actions by creditors. The Debtor’s financial distress and the BVI Proceeding have been widely reported and the result of the proceeding has implications on the global digital asset markets.

Three Arrows Court filing

The crypto market dip struggles to stabilize 

The fall of Three Arrows’ bankruptcy has compelled key business players to restructure their operations. It has prompted businesses to limit consumer withdrawals while a crypto selloff appeared to catch numerous large companies off guard.

The company’s bankruptcy is causing difficulties for several crypto startups that have obtained funding through venture capital. BlockFi announced a collaboration with FTX US yesterday, and it claimed to have lost around $80 million in transactions with 3AC.

Voyager Digital, a crypto brokerage, has become the latest firm to stop trading as a result of Three Arrows’ debts. According to a company statement, Voyager Digital halted trading, deposits, and withdrawals on July 1 at 14:00 EDT.

This was a tremendously difficult decision, but we believe it is the right one given current market conditions. 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

Voyager Digital announced earlier this month, stating that it had $500 million in exposure with Three Arrows. It announced a default for failing to make required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC.

In May, Do Kwon’s algorithmic stablecoin UST collapsed, leaving Alameda and Voyager to salvage $200 million in cash and gold as well as a 15,000 BTC loan. When Do Kwon’s algorithmic stablecoin UST disintegrated in value that month, 3ac lost around $200 million.

The crypto markets are still experiencing a wave of negative sentiment. This has resulted in another $23 billion leaving the cryptocurrency market during the last 24 hours. With final capitulation concerns beginning to surface, the total market cap has fallen below $900 billion for the fourth time this week.

Bitcoin is weakening 4.6% as it approaches $19,000. Ethereum, on the other hand, is slipping into the three-digit range, following a 3.6% decline on Friday. 3 Arrows, created by Zhu and Davies in 2012, is an investment firm specializing in cryptoasset hedge funds and venture capital. 3AC’s investments include DeFi projects such as Aave and Lido, as well as play-to-earn project Axie Infinity, according to the company’s website.

The cryptocurrency market crisis has gotten even worse this week. Liquidations, bank closures, trading suspensions, and at least one bailout dominated discussions among the major players. Meanwhile, Zhu Su, the co-founder of 3AC, is reportedly selling his high-end home in Singapore.

At the time of publication, Bitcoin’s price was 19,147.72 USD, with a 24-hour trading volume of 26,049,261,081 USD. Bitcoin has shed 2.53 percent in the last 24 hours. The current live Ethereum price is $1,041.71 with a $13,632 billion trading. ETH has been down 3.11% in the last 24 hours, according to CoinMarketCap. The crypto market cap is $862.88B, which is a 2.09 percent decrease over the previous day.

Florence Muchai

Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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