The crypto hedge fund Three Arrows does not meet the claims for the lenders

Three Arrows Capital could not meet the lenders' claims to find additional funds after his bets on digital currencies have become angry, which fell into a crisis to the prominent crypto hedge funds that was triggered by a credit clamp in the industry.

The failure of the group to meet Margin Calls last weekend makes the group the youngest victim of an acute drop in prices for many tokens such as Bitcoin and ether that spreads through the market. Three Arrows, based in Singapore, is one of the largest and most active actors in the crypto industry with investments in credit and trading platforms.

The lenders severely tightened the loan offer after the shocks last month. Celsius, a large crypto finance service company, blocked withdrawals last week, while two large tokens collapsed in May.

The crypto loan blockfi based in the USA was one of the groups that at least some of the positions of Three Arrows, which means that he reduced his commitment by reducing collateral that the fund had stored to secure his borrowing, according to the person familiar with the matter.

Three Arrows, which made a “strategic” investment in Blockfi in 2020, Bitcoin had borrowed from the lender, said people, but was unable to meet an additional claim. One of the people said that the liquidation was made by mutual agreement.

"We are in the process of communicating with relevant parties and are determined to clarify this," said Su Zhu, co -founder of Three Arrows, on Wednesday on Twitter, without calling a counterpart. The company did not respond to a request for comment.

Yuri Mushkin, Chief Risk Officer from Blockfi, said the group "can confirm that we recently exercised our best business judgment towards a large customer who has not fulfilled his obligations.. We believe that we were one of the first to take measures."

he added that Blockfi had held collateral that exceeded the amount of the loan.

"The prudent and proactive risk management of Blockfi benefits our broader customer base and enables us to remain open in times of market stress for business," said Mushkin.

The problems with Three Arrows crashed into Finblox, a platform that offers retailers 90 percent annual returns to give their cryptos. Finblox, which is supported by the risk capital company Sequoia Capital and received an investment by Three Arrows, reduced his payout limits by two thirds late Thursday, and cited the Situation at the hedge fund.

Three Arrows, which is operated by ZHU and his co -founder Kyle Davies, is known for his Bullish bet on crypto. ZHU had represented a "super cycle" view of Krypto, in which an increasing mainstream acceptance meant that the prices would continue to rise without falling back into a short-term bear market.

last month he admitted that the current sale had proven the opposite. "Unfortunately, the Supercycle pristine thesis was wrong, but crypto will still thrive and the world will change every day," tweeted ZHU at the end of May.

"They were really big and very active. They went to some enormous positions," said David Siemer, CEO of Wave Financial, a digital asset manager. He added that large crypto companies all over the world probably came into contact with Three Arrows: "They worked with everyone."

Sources of industry, Three Arrows, who are managed mainly, if not exclusively, the equity of ZHU and Davies. One person who has spoken to managers in the past few months said that they have been informed that the total value of the fund was $ 4 billion. The blockchain analytics company Nansen previously estimated the fund's assets at $ 10 billion.

Another person who works at a crypto trade company said she had not been able to reach Three Arrows in the past few days. "They don't answer anyone," they said.

One of the great missions by Three Arrows was Luna, the sister token of the algorithmic stable coin terra. Both imploded in May and went to zero, a shot in the market, which transformed the months of steady decline in crypto prices into a more dramatic defeat.

The fund has had participations in a variety of crypto ventures, whose tokens have developed poorly in recent months, including Avalanche, Solana and the game Axie Infinity, all of which have been fell by around 90 percent in November.

According to Factset data, Three Arrows was also the largest investor in units of the Grayscale Bitcoin Trust, GBTC. GBTC is currently trading at a discount of 30 percent on Bitcoin's price, since the US stock exchange supervisory authority has so far rejected it to approved it as an exchange-traded funds that would be open to private investors.

until early 2021 GBTC was traded with a surcharge of Bitcoin's price. This offered an arbitrage option for funds such as Three Arrows that borrowed Bitcoin and deposited against GBTC units at Grayscale, which could then be sold on the free market. Grayscale does not allow GBTC to be redeemed for the underlying Bitcoin.

According to his last report to the SEC in January 2021, Three Arrows had almost 39 million GBTC units worth $ 1.2 billion in late 2020. The same position would now be rated with only $ 550 million.

Michael Sonnenshein, CEO of Grayscale, said that he has no knowledge of the trades from Three Arrows, but added: "There are players here who have used too much leverage.. A large price correction sends shock waves through the ecosystem".