Is Three Arrows Capital insolvent?

Three Arrows Capital (3AC), one of the largest digital currency venture capital companies, fails to meet margin calls. As a result, some of its lenders like BlockFi have began liquidated the positions that 3AC had on its platform.

BlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.

— Zac Prince (@CostSegZac) June 16, 2022

What happened to 3AC?

3AC was one of the largest holders of a few coins and tokens that are down nearly 90% from their all-time highs, such as Terra (LUNA), Solana (SOL), Avalanche (AVAX), and Axie Infinity (AXS).

After LUNA crashed and the digital currency market continued to plummet, the founders of 3AC went dark—they stopped tweeting and its co-founder deleted his social media account. 

3AC in trouble? rumors swirling

– Kyle and Zhu havent tweeted or liked anything in days
– Zhu took every coin and # tag out of his bio
– Zhu deleted his instagram
– an hour ago they dumped 30k stETH and reduced all AAVE positions

— moon (@MoonOverlord) June 14, 2022

Rumors began to spread that 3AC was insolvent; the fund was known for taking leveraged bets and being a power-user on some of the most popular digital currency lending platforms. Many of the companies 3AC worked with and borrowed from tried to get in contact with the team once they heard these rumors, but the 3AC team did not answer their calls.

8) Fast forward to 24 hours ago, our funds monitoring script noticed that ~1m was missing from our accounts with them. We reached out to @KyleLDavies , the Ops team on Telegram about the missing funds- no replies. We tried calling them- they were online and they didn't pick up.

— Dan (@8BlocksDan) June 16, 2022

Then, 3AC co-founder Zhu Su broke his Twitter silence and sent a tweet indicating that Three Arrows Capital was trying to work its way out of a bad position. Many people took this tweet as confirmation that 3AC was on its way to insolvency.

We are in the process of communicating with relevant parties and fully committed to working this out

— 朱溯 🐂 (@zhusu) June 15, 2022

Can 3AC tank the market?

3AC had a presence on many different digital currency platforms, which means that many different digital currency platforms have exposure to 3AC. 

https://twitter.com/CryptoEthan/status/1537511336908685312

3AC is inching towards insolvency and possibly bankruptcy, and its actions negatively affect the businesses it worked with and through. 

IMPORTANT UPDATE FROM FINBLOX! pic.twitter.com/VjclRMMiSe

— Finblox (@finblox) June 16, 2022

Finblocks, a digital currency lending platform that 3AC is an investor in, has reduced its withdrawal limits, disabled the creation of wallet addresses for new users, suspended its referral program, and suspended reward distributions on its platform while it “evaluates the effect of 3AC on the [platforms] liquidity.”

11) What we learned is that they were leveraged long everywhere and were getting margin-called. Instead of answering the margin calls, they ghosted everyone. The platforms had no choice but to liquidate their positions, causing the markets to further dump.

— Dan (@8BlocksDan) June 16, 2022

Because 3AC had a hand in so many different digital currency platforms, its insolvency could harm the broader blockchain and digital asset markets, especially if service providers are forced to liquidate 3AC positions due to the risk that they pose, which would add to the selling pressure in an already declining market.

3AC’s insolvency is a developing story, but some expect it to come to an end via legal proceedings against the venture capital firm.

12) However they still have assets on a number of platforms (you know who you are). We call for you to freeze their assets so that those who 3AC owes can be paid back in the future after legal proceedings.

— Dan (@8BlocksDan) June 16, 2022

Watch the BSV Global Blockchain Convention Dubai 2022 Day 1 here:

https://www.youtube.com/watch?v=ggbZ8YedpBE

Watch the BSV Global Blockchain Convention Dubai 2022 Day 2 here:

https://www.youtube.com/watch?v=RzJsCRb6zt8

Watch the BSV Global Blockchain Convention Dubai 2022 Day 3 here:

https://www.youtube.com/watch?v=RzSCrXf1Ywc