The underlying belly of the cryptocurrency market is dark and full of terrors about financial transactions that the typical investor doesn’t see. Millions and billions of dollars are being crushed between companies, putting investors’ money at risk. Three Arrows Capital (3AC) fell prey to its trades by borrowing money from across the industry and investing the capital in other crypto projects.
What is Three Arrows Capital and what do they do?
Three arrows capital is a hedge fund touting itself as the go-to place for risk-adjusted returns. 3AC has been on the market for over ten years and is the best in the industry. The company was founded in 2012 by Su Zhu and Kyle Davies and is headquartered in Singapore.
Why Did Three Arrows Capital Collapse?
Investors lend their cryptos to companies and in return earn additional interest as a form of passive income. 3AC’s business model was simple: their strategy involved borrowing money from across the crypto industry. The money is then invested in other crypto projects and yields returns if the project does well. Three Arrows Capital then paid off the borrowed loans and took a portion for itself as profit. In this cycle, the borrower, lender and investors who lent their cryptos earned their fair share of income.
Three Arrows Capital borrowed capital from dozens of crypto companies and the business went on for over a decade.
However, the wake-up call came in 2022 after Bitcoin and the cryptocurrency market went through a carnage of epic sorts. Bitcoin plunged below $20,000 this year from its all-time high of $69,044, which it reached in November last year.
The market was bleeding a lot of money and most crypto companies suffered losses. The flow of money dried up and also came to a standstill. The free movement of money flows came to a standstill and the problems started to brew.
Since the market crashed, Three Arrows Capital was unable to repay its borrowed loans and the company filed for bankruptcy. Not only has 3AC destroyed itself, but it has also ruined the lives of its lenders.
Three Arrows Capital had borrowed money from:
- Genesis
- Voyager
- BlockFi
- Blockchain
- Bitcoin.com
- BitMex
- Including Deribit.
A handful of the above companies have filed for bankruptcy because Three Arrows Capital is unable to repay its loans.
Also read: Voyager Digital Files for Bankruptcy; FTX CEO among unsecured creditors?
What will happen to 3AC now?
A court in the British Virgin Islands last month ordered the liquidation of Three Arrows Capital. 3AC received a $650 million notice for default from Voyager Digital. In addition, Voyager Digital confirmed that 3AC owes them 15,250 Bitcoins as borrowed capital.
Also read: 3 Arrows Capital co-founders are missing amid bankruptcy filing
In a recent update, 3AC founders Su Zhu and Kyle Davies are reportedly missing and their whereabouts are unknown. It is rumored that the co-founders have fled Singapore and must still be underground.
“The foreign representatives understand and believe that although the debtor has had certain operations in Singapore, the current location of Mr Davies and Mr Zhu remains unknown. Rumor has it that they have left Singapore. read a document from the lawyers.