Court documents reveal that bankrupt crypto hedge fund Three Arrows Capital has an extensive list of creditors. It owes a whopping $3.5 billion and there are 27 different companies that are on the list of its creditors, including names like Voyager Digital, Blockchain.com as well as lender Genesis Global Trading.
On July 7th, affidavits had been filed that provided details about the liquidation and bankruptcy of 3AC, and these were made public by the company Teneo, which has been hired for overseeing the process of the crypto hedge fund’s liquidation.
Filings disclose that Three Arrows Capital had not been able to pay its loans and had also missed several margin calls with various lenders. Therefore, its investment accounts had fallen below the levels required and the crypto hedge fund had not topped them up.
The details disclosed that out of the $3.5 billion that 3AC owes, it had obtained the most loans from Genesis, a company that falls under the Digital Currency Group. According to court documents, the now-insolvent company had obtained a loan from Genesis worth $2.36 billion. This particular loan had an 80% margin requirement and was under-collateralized.
The filings extend for more than a thousand pages and repeatedly mention that Three Arrows Capital has now become insolvent, so the company should be wound up, just in different ways. On June 26th, Charles McGarraugh, the Chief Strategy Officer of Blockchain.com, filed an affidavit.
This revealed that Kyle Davies, the co-founder of 3AC, had informed him on June 13th that they had attempted to borrow again from Genesis. They had asked for 5,000 bitcoin, which had been valued at $125 million at that time and the reason for paying a margin call to a different lender.
This practice is usually seen in Ponzi schemes that use funds from new investors to pay off earlier ones.
Real estate investments
In addition, the filings also shed light on some real estate investments that had also been made by the crypto hedge fund under the name of the wife and child of the company’s co-founder Su Zhu. These include two residences valued at $28.5 million and $48.8 million, based in Singapore.
Teneo’s Senior Managing Director, Russell Crumpler said in an affidavit that it was unclear at this stage as to how the founders of 3AC had dealt with the company’s assets and whether they had been used for making the purchases mentioned. The liquidator also said that the company’s founders should not be permitted to deal with any asset.
The troubles for the crypto hedge fund had first begun when the infamous Terra blockchain of Do Kwon had crashed back in May. Since then, the entire crypto industry has dealt with turmoil. There has been a chain reaction of financial troubles, liquidations, and bankruptcies across the industry. According to the liquidation documents of 3AC, the fund suffered losses of $200 million when the UST stablecoin destabilized and resulted in the crash of the LUNA token.