Capital markets News

Three Arrows owes $3.5bn. Genesis crypto lent $2.4bn

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Three Arrows Capital (3AC), the crypto hedge fund that went into liquidation in mid-June in the British Virgin Islands, has borrowed around $3.5 billion, although the size of its assets is not yet clear. Its largest creditor was Genesis Trading at $2.4 billion, with an outstanding claim of $1.2 billion net of collateral. Genesis parent Digital Currency Group has bailed out the company. Voyager Digital, which went bankrupt due to its $650 million 3AC exposure, was the second largest creditor. 

The third largest loan was from Equities First, which arguably was a contributor to the insolvency of crypto lender Celsius. The Celsius bankruptcy filing spoke of an un-named private lending platform that failed to return collateral in mid-2021. As a result, Celsius is currently owed $439 million. The Financial Times reported that Equities First is the platform. It lent $162 million to 3AC against collateral currently worth $91 million.

Yesterday Teneo BVI, the 3AC liquidator, published a 1,157 page document that was subsequently removed from its website. Two of the most interesting aspects are the Genesis claim and the affidavit from 3AC director Kyle Davies which lists the biggest debts.

The former director attributed the troubles to the collapse of Terra USD / Luna when 3AC held around $600 million at the time.

Davies’ list correctly stated the amount of the Genesis loan but listed substantially less pledged collateral of only $377 million at today’s prices, including 17.5 million Grayscale Bitcoin Trust shares. However, Genesis, in its claim, said it had secured Bitcoin and ETH collateral worth $695 million and shares worth $470 million, leaving it exposed to the tune of $1.2 billion.

The 2.7 million AVAX and 13.5 million NEAR tokens pledged (worth $93m on June 23) are not yet under the control of Genesis. It is also seeking control of Deribit and Starkware shares owned by 3AC.

Another point made by Kyle Davies is that the 3AC fund had significant outside investment. At the end of December 2021, fellow director Su Zhu owned shares that he estimated were worth $1.4 billion. However, Davies made no mention of owning shares himself.

Hence, it appears the majority of the Warbler Lead class of shares were owned by third parties and were worth almost $1.2 billion at the end of 2021. There were other classes of shares as well.

Image Copyright: Composite Ledger Insights