- Three Arrows Capital Collapsed Following Extreme Crypto Market Swings, Petition Says
- Nansen estimated that 3AC managed $10 billion in assets in April, but the petition shows it only held $3 billion at one time.
Less than a week after being put into liquidation by a court in the British Virgin Islands, crypto hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy on Friday.
Representatives from law firm Latham & Watkins filed the petition in a New York court, according to court documents.
“Debtor activity has collapsed following the extreme swings in the cryptocurrency markets,” representatives wrote. They added that they do not know the current location of 3AC co-founders Zhu Su and Kyle Davies.
“Foreign officials understand and believe that although the debtor had certain operations in Singapore, the current whereabouts of Mr. Davies and Mr. Zhu remain unknown. They say they left Singapore.
The Last of Zhu Twitter update was June 15 – when he appeared to respond to insolvency rumors – while Davies himself offered no word on the matter.
Singapore-based 3AC is one of the most high-profile cryptocurrency companies to have collapsed under pressure and faced liquidity issues caused by the market’s sell-off in recent weeks. Foreign companies – based outside of the United States – use Chapter 15 to secure bankruptcy protection by preventing creditors from taking legal action.
While blockchain analytics company Nansen is reported for stating that 3AC held $10 billion in assets as recently as April, the petition alleges that the company held only $3 billion in assets at the same time.
A few days before filing for bankruptcy, a court in the British Virgin Islands ordered 3AC to liquidate its assets. Two agents from the consulting firm Teneo Restructuring have been appointed to handle its insolvency, Blockworks has learned. A source said Teneo would set up a website where creditors could make claims against the company.
Three Arrows, founded in 2012 by classmates Zhu and Davies, handles crypto-asset hedge funds and venture capital and is known for its high-leverage betting. According to his website3AC’s investments include DeFi projects like Aave and Lido, and play-to-earn project Axie Infinity.
Chris McCann, a partner at venture capital firm Race Capital, told Blockworks in a recent interview that 3AC is an example of a company trying to be both a crypto hedge fund and a crypto venture fund.
“It’s like the worst of both worlds,” he said, adding that companies like 3AC and Celsius have presented themselves as decentralized. “You have people who aren’t building on a blockchain, who aren’t being transparent about things, and who aren’t taking all the major tenants that everyone takes for granted in the space, all the while calling themselves Web3 companies and using all the capital they raise for external, exogenous things.”
“I always felt very uncomfortable with them, even at first,” he said.
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