Crypto hedge fund defaults on $670M loan

Cryptocurrency hedge fund Three Arrows Capital (3AC) has failed to make payment on a loan issued by crypto broker Voyager Digital. This marks the largest institutional crash of the current “crypto winter.”

Why should we care?
A significant catalyst to 3AC’s fall was the fund’s stake in the Terra-Luna coin, which plummeted as a result of large-scale short-selling. Now in liquidation, 3AC is just one of many companies to tank during this crypto crash. Bitcoin hovered around $20,700 in trading on Monday, a 70% drawdown from its Q4 2021 peak. With fears of a looming recession, high inflation rates, and lingering scares of the past pandemic, many are apprehensive that the worst is yet to come. 3AC’s leadership appears blissfully ignorant—despite its defaulted payments to Voyager as well as liquidated positions in the company by lenders like BlockFi and Genesis. The hedge fund’s founder, Zhu Su, said 3AC is “communicating with relevant parties and fully committed to working this out.” If the leaders of leading crypto institutions like 3AC refuse to see the writing on the wall, this may suggest 3AC’s demise is only the beginning, with other major crypto companies destined to suddenly collapse. Investors may also take a second look at the balance sheets of Voyager, BlockFi, and Genesis, given that they’re unlikely to regain all of the funds they lent to 3AC.