Cryptocurrency hedge fund Three Arrows Capital (3AC) has defaulted on its over $670 million loans provided via crypto broker Voyager Digital, which announced the news in a press release published on Monday morning. The company initially set a deadline of June 24 for a total repayment of $25 million, yet rescinded this request for the entirety of the loan amount of $675 million by today, Monday, June 27.
Voyager Digital's $675 million loans to 3AC consisted of largely customer deposits in the form of USDC, around $350 million, and 15,250 Bitcoin, which was hit hard by the price decreases. 3AC intended to utilize the capital to pay back customers the up 12% interest in fees on top of generating much-needed income. The brokerage firm writes in its press release that it "intends to pursue recovery from 3AC and is in discussions with the Company's advisors as to legal remedies available."
Like many within the industry, 3AC was hit hard by the various market constraints that have limited crypto and NFT business in the past several weeks. Much of the losses experienced by 3AC can largely be attributed to the downfall of Luna, which the company had invested in alongside a derivative of ether called "Lido Staked ether." The depreciating nature of 3AC's fund size proved the firm needed to take steps to protect its customers, which led to discussions of asset sales and bailout potentials, but nothing substantial seemingly reared its head.
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Voyager is looking to recoup its lost assets via a wide array of channels. It still has around $137 million in both crypto assets, and cash held within its own coffers as of Friday, June 25. The crypto firm likewise secured a $500 million line of credit, not a mere 24 hours prior, from the likes of Alameda Ventures for more access to necessary liquidity. The credit is partitioned out to 15,000 in bitcoin and $200 million in both USDC and cash, with both lines expiring by the end of 2024 and hold a 5% interest rate payable on maturity.
According to Voyager, it already utilized $75 million in credit last week to handle withdrawals, customer orders, and more. It has yet to pause or cease various necessary transactions on orders and withdrawals and is in continued discussions with Moelis and Co. to unearth more options to stave off the $675 million in losses wrought by 3AC.
Last week, Voyager was hit with a rather egregious 60% price decline when it made notice of 3AC's impending default. Much of 3AC's positions have been liquidated throughout June due to missing several margin calls on most of its crypto investments. According to Bloomberg, Voyager first announced withdrawals to be limited to $25,000 a day before the default notice, yet dropped that down to $10,000 last week at 20 transactions every 24 hours.
It has been a rather tough time for the cryptocurrency realm. With both TerraUSD and Celsius seeing immense losses that have afflicted the entirety of the market, much of the space is still steeped in fear. Many are cutting back on hiring or slicing staff altogether due to incremental losses that are seemingly still compounding. Yet despite the uncertainty, those heavily invested prove adamant about the staying power of varied digital assets.
