Crypto hedge fund Three Arrows Capital has filed for bankruptcy under Chapter 15 of the U.S. Bankruptcy Code, according to a court filing in the Southern District of New York on Friday.
Three Arrows Capital is one of the biggest casualties of the latest so-called “crypto winter”. The digital asset ecosystem has been hit by both a broad market selloff sparked by the Federal Reserve’s interest-rate increases and concerns over individual crypto coins and firms. Bitcoin’s
BTCUSD,
dollar value has fallen by more than a third this month.
The Chapter 15 bankruptcy filing in Manhattan federal court late on Friday came just days after Three Arrows was pushed into liquidation in the British Virgin Islands, following claims that it failed to pay $80 million it owed to digital asset exchange Deribit, the Financial Times reported.
Three Arrows Capital operated as a regulated fund manager in Singapore until last year, when it shifted its domicile to the British Virgin Islands, part of a plan to relocate its operations to Dubai.
The fund, founded by former Credit Suisse traders Zhu Su and Kyle Davies, managed an estimated $10 billion of assets as recently as March, according to blockchain analytics firm Nansen, Bloomberg reported.
The law firm Latham & Watkins is representing Three Arrows in the US bankruptcy. The case is Three Arrows Capital Ltd and Russell Crumpler, 22-10920, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
Insolvency specialists at Teneo, the advisory firm appointed in the British Virgin Islands to liquidate Three Arrows, told the US court that a “significant number of creditors” are expected to make claims against the hedge fund, the Financial Times reported.
In a sign of the scale of Three Arrows’s borrowings, Toronto-listed crypto lender Voyager Digital said in late June that it could lose more than $650 million in loans it made to the crypto investment firm co-founded by Su Zhu and Kyle Davies.
Voyager late on Friday said it was suspending withdrawals and trading on its platform as it explores “strategic alternatives”.
BlockFi, another big crypto lender, said on Friday it had sustained around $80 million in losses due to the Three Arrows collapse even after it unwound some of its positions.
BlockFi on Friday also announced a deal in which FTX will provide it fresh financing in return for an option that allows the crypto exchange to buy the group for up to $240 million.
See also: FTX signs deal to bail out crypto lender BlockFi with option to buy it for up to $240 million
Three Arrows is also facing regulatory scrutiny in Singapore. The Monetary Authority of Singapore reprimanded the group this week for providing false information and breaching an asset under management threshold. Authorities in Singapore said they had been investigating Three Arrows for a year.
