December 11, 2023

Media: BlockFi liquidated part of Three Arrows Capital fund positions

Media: BlockFi liquidated part of Three Arrows Capital fund positions

Crypto lending platform BlockFi has liquidated at least part of hedge fund Three Arrows Capital's (3AC) positions. AboutThis writes the Financial Times, citing informed sources.

In 2020, 3AC became a strategic investorcreditor. A year later, the fund exited his capital and borrowed a large amount of bitcoin, but due to the prevailing market situation, he was unable to meet margin requirements. One of the interlocutors of the publication noted that the position was closed by mutual agreement of the parties.

BlockFi CEO Zach Prince indirectly confirmedFT information. On his Twitter page, he wrote that the company recently "made its best business decision on a client that failed to meet its obligations on an overcollateralized margin loan."

“We accelerated the repayment of the loan and fullyliquidated or hedged the debt associated with it. Customer funds were not affected. We believe we were among the first to take action against this counterparty,” Prince wrote.

Analyst under the nickname FatMan with a link to“trusted sources” also reported that Three Arrows Capital has a “heavy debt” to crypto derivatives exchange BitMEX. According to him, the fund took several positions with insufficient collateral.

The 3AC crisis has affected the entire cryptocurrency industry as many major projects are hedge fund related.

One of the structure's portfolio companies, Finblox,suspended the distribution of customer rewards and the referral program. It also lowered withdrawal limits and banned new users from creating cryptocurrency addresses.

3AC led LFG's $1 billion LUNA token sale. In May, the Terra ecosystem collapsed and its native cryptocurrency became virtually worthless.

Terra's Death Spiral: How and Why LUNA and UST Failed

The fund also invested in the blockchain platformAvalanche, whose native token has shown one of the worst dynamics on the market over the past month. Over the past 30 days, the price of AVAX has dropped 52%, according to CoinGecko. 

On June 17, the project emphasized that 3AC "has never managed, used, or held the Avalanche Foundation's treasury funds."

Three Arrows Capital is one of the largestBitcoin trust investors from Grayscale. According to a filing with the SEC on December 31, 2021, the fund owned nearly 39 million units of GBTC ($1.2 billion at the time). The trust's shares are trading at a 33% discount to net assets under management, according to YCharts.

Anonymous contributor to The DeFi Edge newsletternoted that due to a number of failed investments and vesting restrictions, 3AC does not have sufficient liquidity to meet margin calls.

“A smart person can go broke in three ways: alcohol, ladies and leverage,” he quoted Charlie Munger, vice chairman of the board of directors of Berkshire Hathaway.

The author also emphasized that 3AC offered financial management services to some portfolio companies and projects.

Let us remind you that on June 16, the trading company 8 Blocks Capital accused Three Arrows Capital of using client funds to cover margin calls.

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