The co-founder of Three Arrows Capital confirmed that the fund, which has been affected by the LUNA-UST crash, is considering selling the asset or being acquired to get out of a predicament.
Three Arrows Capital officially spoke after a series of difficult days
On the evening of June 17, the Wall Street Journal reported that the crypto fund Three Arrows Capital (3AC) was badly damaged by the collapse of LUNA-UST in May, leading to the current situation when the market is continue to turn bad.
This information was confirmed by Kyle Davies, co-founder of the fund along with CEO Zhu Su.
Mr. Davies revealed that the total assets under management of Three Arrows Capital as of April 2022 is about 3 billion USD. The fund also invested $200 million in LUNA through a $1 billion funding round to build the Luna Foundation Guard, but this amount returned to zero when the LUNA price crashed. Three Arrows Capital also participated in the sale of $1.5 billion in Bitcoin to the Luna Foundation Guard just a few days before the LUNA-UST crisis. The negative volatility of the crypto market in the next period further erodes the fund’s investment portfolio.
It is worth mentioning that CEO Zhu Su has repeatedly promoted and praised the LUNA-UST model on his personal Twitter page, and ended up having to post apologizing to the community for his statements after the project collapsed Mr. Zhu Su also got it wrong for his Bitcoin price prediction to rise to $2.5 million.
Regarding the immediate solution, Mr. Davies told the Wall Street Journal that he has hired legal and financial consultants to serve the plan to sell off assets or be acquired by another company. They are also negotiating with creditors to get more time. The co-founder said:
“We are still crypto believers. We are committed to resolving the situation and finding a suitable solution for investors.”
Three Arrows Capital’s current assets are said to include the coin/token in possession (exact amount is unknown), tokens of crypto projects invested by them (unlocked or not), a large amount of GBTC shares of Grayscale (rumored to be around 500 million USD), stETH token (but has been massively sold in the past days), etc. If this happens, there is a high chance that the cryptocurrency market will suffer another “shock”.
The option of being bought by someone and “rescued” is not appreciated, because few organizations are willing to “burden” 3AC with an amount that is said to be up to “9 digits”.
Mr. Davies further revealed:
“We are not the only ones that have suffered. There has been a chain effect that affects many different parties.”
As the information has been updated by Coincu News, the cryptocurrency market has continuously witnessed many “big hands” falling into a difficult situation because of liquidity problems. The Celsius lending platform is where it all started, when the price of stETH was out of phase with ETH, causing them to lose their ability to meet the withdrawal needs of customers and was forced to block deposits / withdrawals on June 13.
Three Arrows Capital followed after that when it was constantly involved in rumors of “default”, losing its ability to meet liquidity for mortgage loans, leading to mass liquidation. The fund is also accused of misusing investors’ money to “save” borrowed positions, and then keep quiet when questioned by investors.
Many major organizations in the crypto industry that are believed to be connected to 3AC such as Avalanche, Trader Joe, dYdX, etc. have denied being affected by the fund’s situation. Exchanges including FTX, Deribit, BitMEX and the BlockFi lending platform confirmed to have liquidated the collateral of Three Arrows Capital.
Recently, the crisis has also spread to Finblox and Babel Finance, lending units, and investment fund DeFiance Capital because it is believed to be linked to Three Arrows Capital.
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