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More Trouble for 3AC as it now looks for Crypto Bailout and Asset Sale Option

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Su Zhu and Kyle Davies
Su Zhu and Kyle Davies

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Three Arrows Capital is now in the process of being liquidated by cryptocurrency lending platforms. After failing to meet its margin calls, BlockFi, one of the main decentralized finance (DeFi) lending organizations, has already liquidated 3AC.

As a result of the continuous cryptocurrency market downfall, the crypto hedge fund and venture capital firm is exploring the option of selling its remaining assets or perhaps seeking a bailout.

The Wall Street Journal also confirms the same with a report stating that Three Arrows Capital is exploring asset sales and a bailout option as it faces a serious liquidity issue.

Three Arrows Capital is said to have employed legal and financial advisers to assist in the development of a strategy to repay investors and lenders.

Founders Discuss Bailout Option

According to a piece written in The Wall Street Journal on Friday, Three Arrows Capital may sell its assets or seek a bailout from another business to address its persistent liquidity issues.

Su Zhu and Kyle Davies, the crypto hedge fund’s founders, revealed to the world in an interview with the New York newspaper that they had sought legal and financial advice as they attempted to manage their largest crisis yet as a result of the recent fall in the cryptocurrency market.

Davies stated that they are dedicated to exploring different options and finding the best possible solution for all of their stakeholders before announcing that the fund was considering asset sales and a possible bailout.

As it formulates a plan, the company also hopes to buy more time with creditors.

This news comes after earlier this week when the crypto world speculated that Three Arrows was approaching insolvency.

As the allegations circulated, Zhu and Davies remained silent, except for a cryptic tweet from Zhu indicating that the company was totally dedicated to sorting this mess out in the best possible manner and communicating with concerned parties.

Though the situation’s exact specifics were unknown, a suspicion that the business had been margin called spread like wildfire on Crypto Twitter.

On-chain data also indicated that the company liquidated millions of dollars worth of Lido-staked Ethereum assets, most likely to raise cash to pay its creditors.

According to various news sources, BlockFi and other crypto businesses have acknowledged that they have liquidated part of the firm’s assets.

Terra Luna Worsened Things for Three Arrows

Three Arrows was founded in 2012 and has since grown to become one of the largest hedge funds in the crypto field, with over $10 billion in assets under management at its height.

However, as the crypto market began to collapse in 2022, it suffered a hit. When the news of the firm’s difficulties initially broke, Bitcoin hit an 18-month low of just around $21,000, a 70 % drop from its November high. The current crypto slump is because of tumultuous macroeconomic conditions that Federal Reserve’s commitment to raising interest rates aggravated further.

The business had spent $200 million in Terra’s LUNA cryptocurrency before it crashed to zero last month, according to the Wall Street Journal story.

Layer 1 tokens like Solana and Avalanche, Ethereum DeFi apps like Aave and Balancer, and a few crypto-focused firms like Deribit and Fireblocks are among the firm’s other investments.

Davies also mentioned to The Wall Street Journal that crypto did not impact Three Arrows first, stressing that the larger bitcoin industry has harmed numerous companies. Celsius, a crypto loan business, said earlier this week that it has blocked customer withdrawals due to extreme market conditions, a day before the firm’s problems came to light.

In 2021, Zhu and Davies gained recognition for supporting the “supercycle” theory. It proposed that crypto had hit a tipping point that would prohibit the asset class from experiencing significant downturns as it had in prior negative cycles.

As the market continued its savage hemorrhage in the aftermath of Terra’s collapse, Zhu tweeted in late May that the premise was “regrettably inaccurate.”

The company is assessing its losses and evaluating its illiquid assets, according to the article.

Nichol Yeo of Solitaire LLP, a law company assisting Three Arrows, said that the firm is updating the Monetary Authority of Singapore about its plans.

The Three Arrows website now promotes a number of bitcoin investments. The company has yet to make a formal declaration.

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