A decline in digital currency pricing has damaged 3AC and exposed a financial dilemma at the company.
One of the most prominent cryptocurrency hedge funds, Three Arrows Capital, has been forced into liquidation, making it one of the most prominent victims of the most recent “crypto winter.”
The person who spoke on condition of anonymity because they were not permitted to discuss the topic publicly stated that Teneo had been brought on board within the past few days in order to cope with the liquidation process.
According to the information provided by the source, Teneo is currently in the very first phases of the liquidation procedure. The restructuring company is taking action to realise the value of the assets that 3AC has. After that, within the next day or two, it will establish a website with information on how creditors can get in touch with the company to make any claims they may have, according to the source.
3AC, which was co-founded by Zhu Su and Kyle Davies, is one of the most notable crypto hedge funds around and is well-known for its highly leveraged bets. Crypto hedge funds are financial vehicles that concentrate on investments in digital assets such as cryptocurrency. Zhu is an enthusiastic proponent of bitcoin and its potential.
However, a decline in the pricing of digital currencies, which has resulted in the loss of billions of dollars from the market in recent weeks, has been detrimental to 3AC and has brought to light a liquidity issue at the company.
On Monday, 3AC failed to make payments toward a loan from Voyager Digital that was comprised of $350 million in the USDC stablecoin, which is pegged to the value of the US dollar, and 15,250 bitcoin, which would be worth approximately $304.5 million at today’s values.
3AC was exposed to the algorithmic stablecoin terraUSD, which ultimately failed, as well as its sister token luna.
The United States-based cryptocurrency lenders BlockFi and Genesis reportedly liquidated some of 3AC’s positions, according to a report published earlier this month by the Financial Times, which cited persons familiar with the situation as its source. 3AC had taken out a loan from BlockFi, but they were unable to satisfy the required margin.
A circumstance known as a margin call occurs when an investor must make a larger financial commitment in order to avoid incurring losses on a trade that was executed using borrowed money.
Fears of an industry-wide contagion have been created as a result of the dismantling of 3AC in market segments that could potentially be exposed to the corporation.
There have been problems with liquidity experienced by other cryptocurrency organisations as well. Both the lending company Celsius and the cryptocurrency exchange CoinFlex were compelled to stop customer withdrawals, citing “extreme market conditions” as the reason for their actions.
CoinFlex, on the other hand, ran into another snag when one of its customers refused to clear a debt of $47 million, which caused the company to run into liquidity issues.