From $10 Billion to $0: How Three Arrows Capital Collapsed Overnight
The underlying belly of the cryptocurrency market is dark and full of terrors regarding financial dealings that don't meet the eye of the typical investor about financial dealings that don't meet the eye of typical investor. Millions and billions of dollars are floundered between firms leaving investors' funds in jeopardy.
Three Arrows Capital (3AC) fell prey to its dealings by borrowing money from across the industry and investing the capital in other crypto projects.
What is Three Arrows Capital & What Do They Do?
Three Arrows Capital is a hedge fund that touted fund that touted itself as the go-to place providing risk-adjusted returns. 3AC has been in the market for over a decade and is the best in the industry. The firm was founded in 2012 by Su Zhu and Kyle Davies and its headquarters is in Singapore.
Why Did Three Arrow Capital Collapse?
Investors lend their cryptos to companies and in return earn extra interest as a form of passive income. 3AC's business model was simple their strategy involved borrowing money from across the crypto industry the funds will then be invested into other crypto projects and earn a return when the projects do well. Three Arrows Capital then paid off the borrowed loans and took a cut for itself as profits. in this cycle, the borrower the lender firm, and investors who lent their cryptos earned their fair share of income.
Three Arrows Capital borrowed capital from dozens of crypto firms. and business was as usual for over a decade.
However, its wake-up call came in 2022 after Bitcoin and the cryptocurrency market experienced a bloodbath of epic sorts. Bitcoin plummeted below $20,000 this year from its all-time high of $69,044 which it reached in November last year.
The market bled enormous money, and most crypto firms faced losses. The flow of funds dried up and also came to a standstill. The free activity of cash flow faced a sharp break, and the trouble started to brew.
Furthermore, Since the market crashed, Three Arrows Capital could not repay its borrowed loans, and the firm filed for bankruptcy.
Three Arrows Capital had borrowed money from Genesis, Voyager, BlockFi, Blockchain, and Bitcoin. com, BitMex, and Deribit, among others. Above mentioned firms expressed Three Arrows Capital cannot repay its loans.
What’s Happening Now to Three Arrows Capital
A court in the British Virgin Islands ordered the liquidation of Three Arrows Capital last month. Three Arrows Capital was slapped with a notice for defaulting Voyager Digital worth $950 million Despite Voyager Digital confirming that Three Arrows Capital owes them 15,250 Bitcoins as borrowed capital.
In a recent update, the founders of 3AC Su Zhu and Kyle Davies are reportedly missing, and their whereabouts are unknown. Rumors state that the co-Founders have fled Singapore and remain to be underground.
“The Foreign representatives understand and believe that while the Debtor has had certain operations in Singapore, Mr. Davies and Mr. Zhu’s current location remains unknown. They are rumored to have left Singapore,” read a document from the lawyers.