The troubled crypto hedge fund, Three Arrows Capital, has signed for Chapter 15 bankruptcy in New York. A Chapter 15 Bankruptcy is usually filed to protect the debtor’s assets. The firm Latham & Watkins will be legally representing the bankrupt hedge fund. The filing for bankruptcy signals the end of one of the biggest names in the crypto space, which managed as much as $10 billion in assets as recently as March.
The bankruptcy filing comes in the wake of Voyager Digital suspending trading and withdrawals, citing unpaid loans to Three Arrow Capital totaling $646 million.
Earlier this month, Voyager issued a statement revealing that it had around $500 million in exposure with Three Arrows. As an aftermath, Voyager issued a notice of default to Three Arrows Capital for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC.
Experts said the descent into bankruptcy by 3AC was slow but expected. Speculations regarding 3AC’s rumored insolvency began spreading when the firm transferred assets to deposit funds on DeFi platforms in order to reduce liquidity risk. Their woes were much worsened by the crash of the algorithmic stablecoin LUNA. This was after 3AC had invested over $200 million in the stablecoin in February.
As if that were not enough, the crypto trading platform 8 BlocksCapital had accused 3AC of skimming $1 million to liquidate margin trading. Also, 3AC has been reported to be owing over $6 million to crypto exchange BitMEX.
The filing for bankruptcy may have become even more necessary when on Wednesday, a court in the British Virgin Islands ordered the liquidation of 3AC, after the firm suffered major losses in the recent market turmoil.
Three Arrows Capital and its Chapter 15 bankruptcy filing set the spotlight on Celsius Network as it is currently battling insolvency cases with regulators and has since suspended withdrawals. Celsius Network has onboard advisors to help with the bankruptcy crisis and is expected to file for insolvency soon.
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