Since being hit hard by a market sell-off in digital assets, cryptocurrency hedge fund Three Arrows Capital Ltd. (3AC) has recruited legal and financial advisors to find a solution for its investors and lenders, the company’s founders announced on Friday June 17.
The co-founder of Three Arrows, Kyle Davies, claimed in an interview that the company has always believed in crypto and that they still do and that it is “committed to working things out and finding an equitable solution for all our constituents,” The Wall Street Journal reports.
As per Nichol Yeo, a lawyer at the legal firm Solitaire LLP who advises Three Arrows, all of the fund’s investors are either wealthy individuals or institutions.
In April of this year, the almost ten-year-old hedge fund that was established by the Wall Street currency traders Su Zhu and Mr. Davies, who were also former schoolmates, had around $3 billion in assets that were being managed by the firm.
3AC is examing its options
According to Davies, Three Arrows is investigating its available choices, which may include the sale of its assets or a takeover by another company. The fund’s goal is to negotiate an extension of its deadline with its creditors so that it may more thoroughly consider its options. The company also continues to do business as it searches for a solution.
Three Arrows participated in a $1 billion token sale earlier this year by Luna Foundation Guard, a foundation founded by TerraUSD founder Do Kwon. The money was put into a reserve for the stablecoin that was denominated in Bitcoin. This reserve’s purpose was to assist in keeping the value of each coin of TerraUSD at $1.
According to Mr. Davies, Three Arrows made an investment of around $200 million in Luna as part of that transaction. However, this figure was virtually wiped away when TerraUSD and Luna both became worthless in a matter of days.
Terra collapse caught them off guard
Before the collapse, there were a few in the cryptocurrency sector who expressed concerns about the stability of TerraUSD and its need for traders to operate as its backup.
Davies stated, “the Terra-Luna situation caught us very much off guard,” he went on to say that the large sell-off was unprecedented. The Luna Foundation sold Bitcoin in May to assist fund TerraUSD, which contributed to the value of Bitcoin declining even more during that month.
Although Three Arrows was able to weather the losses incurred by Luna, the ensuing chain of events that led the values of Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies to drop precipitously in recent weeks presented further challenges.
On June 15, Su Zhu’s tweet stoked fears over insolvency amid market turmoil for the crypto hedge fund this comes just a week after Billionaire Mike Novogratz said two-thirds of crypto hedge funds will go out of business.