Crypto platform Zipmex files for bankruptcy protection in Singapore
July 29 (Reuters) - Southeast Asia-focused cryptocurrency exchange Zipmex said it had filed for bankruptcy protection in Singapore, becoming the latest victim of the global downturn in digital currencies.
Singapore-based Zipmex resumed withdrawals last week, a day after suspending them on July 20, and said it was working to address its exposure of $53 million to crypto lenders Babel Finance and Celsius.
Zipmex's solicitors submitted five applications on July 22 seeking moratoriums to prohibit legal proceedings against Zipmex for up to six months, the cryptocurrency exchange said on Wednesday.
Under Singapore law, such a filing grants companies an automatic moratorium for 30 days, or until a Singapore Court makes a decision on the application, whichever is earlier.
Zipmex, which operates in Singapore, Thailand, Indonesia and Australia according to its website, is the latest in a string of crypto players globally to run into difficulties following a sharp sell off in markets that started in May with the collapse of two paired tokens, Luna and TerraUSD.
Thailand's Securities and Exchange Commission said on Monday it was working with law enforcement to look into potential losses among the public after Zipmex temporarily suspended withdrawals.
Singapore's ambitious cryptocurrency sector, by some measures Asia-Pacific's largest, has also been shaken by the recent collapse of crypto fund Three Arrows Capital.
Three Arrows founders, in hiding from death threats, on their bungled crypto gambles - and that US$50m yacht
After 5 weeks in hiding, the disgraced founders of Three Arrows Capital spoke extensively about the spectacular implosion of their once high-flying hedge fund, saying their bungled crypto speculation unleashed cascading margins calls on loans that should never have been made.
Zhu Su and Kyle Davies, both 35, first became friends in high school. They built 3AC into a crypto-trading behemoth before its collapse bankrupted creditors and exacerbated a selloff that foisted steep losses on mom-and-pop owners of Bitcoin and other tokens.
At times contrite and at times defensive, Davies and Zhu, speaking from an undisclosed location, described a systemic failure of risk management in which easy-flowing credit worsened the impact of wrong-way bets.
They acknowledged the collapse triggered widespread pain, but mostly talked around questions about the effect on others in the industry. Instead, they stressed they suffered deep losses while denying allegations they pulled money out of 3AC before it all blew up. “People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe,” Zhu said. “But they’re gonna, you know, say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true.”
Advisers in charge of liquidating the fund said in July 8 filings that Zhu and Davies hadn’t cooperated with them and that the founders’ whereabouts were unknown. Zhu said death threats had forced them into hiding. “That does not mean that we haven’t been communicating with all relevant authorities,” said Zhu in the telephone interview with Davies and two lawyers from Solitaire LLP. “We have been communicating with them from day one.”
The two declined to say where they were but one of the lawyers on the call said their ultimate destination is the United Arab Emirates, which has emerged as a hot spot for crypto.
In a wide-ranging interview, the former Credit Suisse traders detailed the events leading to their fund’s implosion, which itself set off a chain reaction that has cost institutions and small-time speculators billions of dollars.
“The whole situation is regrettable,” Davies said. “Many people lost a lot of money.”
Creditors of the fund, recently registered in the British Virgin Islands, filed paperwork saying they’re owed more than US$2.8 billion in unsecured claims. That figure is expected to rise significantly, court papers show. To date, liquidators overseeing the insolvency have gained control of assets worth at least US$40 million.
Zhu and Davies, long among the most vociferous crypto bulls in an industry known for extremes, put on trades – turbocharged by leverage – that put 3AC at the centre of a series of implosions that convulsed the crypto market as prices retreated this year from their highs last fall. “We positioned ourselves for a kind of market that didn’t end up happening,” Zhu said.
“We believed in everything to the fullest,” added Davies. “We had all of our, almost all of our assets in there. And then in the good times we did the best. And then in the bad times we lost the most.”
At the same time, they claim, they weren’t outliers. They describe a confluence of interrelated one-way bets and accommodative borrowing arrangements that all blew up at once, leading not just to their fund’s demise but to bankruptcy, distress and bailouts at firms like Celsius Network, Voyager Digital and BlockFi.
“It’s not a surprise that Celsius, ourselves, these kind of firms, all have problems at the same time,” Zhu said. “We have our own capital, we have our own balance sheet, but then we also take in deposits from these lenders and then we generate yield on them. So if we’re in the business of taking in deposits and then generating yield, then that, you know, means we end up doing similar trades.”
Efforts by Zhu and Davies to deflect blame are a sharp contrast to the pair’s previously relentless campaign of cheer-leading cryptoassets and belittling critics. Nerves were raked anew this week by creditor claims that the founders put a downpayment on a US$50 million yacht before the fund went under, a claim Zhu said is part of a smear campaign.
The boat “was bought over a year ago and commissioned to be built and to be used in Europe,” Zhu said, adding the yacht “has a full money trail.” He rejected the perception that he enjoyed an extravagant lifestyle, noting that he biked to work and back every day and that his family “only has two homes in Singapore.”
“We were never seen in any clubs spending lots of money. We were never seen, you know, kind of driving Ferraris and Lamborghinis around,” Zhu said. “This kind of smearing of us, I feel, is just from a classic playbook of, you know, when this stuff happens, when funds blow up, then you know, these are kind of the headlines that people like to play.”
Davies and Zhu acknowledged heavy losses related to trades in Luna and the now-defunct algorithmic stablecoin TerraUSD, saying they were caught by surprise at the speed of the collapse of these tokens.
“What we failed to realise was that Luna was capable of falling to effective zero in a matter of days and that this would catalyze a credit squeeze across the industry that would put significant pressure on all of our illiquid positions,” Zhu said.
In retrospect, Zhu said, the firm may have been too close to Terra’s founder, Do Kwon.
“We began to know Do Kwon on a personal basis as he moved to Singapore. And we just felt like the project was going to do very big things, and had already done very big things,” he said in describing the firm’s miscalculations. “If we could have seen that, you know, that this was now like, potentially like attackable in some ways, and that it had grown too, you know, too big, too fast.”
“It was very much like a LTCM moment for us, like a Long Term Capital moment,” Zhu said. “We had different types of trades that we all thought were good, and other people also had these trades,” Zhu said. “And then they kind of all got super marked down, super fast.”
One of those trades involved an Ethereum-linked token called staked ETH, or stETH - designed to be a tradable proxy for Ether and widely used in decentralized finance. While every stETH is meant to be redeemable for one Ether once long-awaited upgrades of the Ethereum blockchain take effect, the turmoil sparked by Terra’s collapse caused its market value to fall below that level. This, in turn - in Zhu’s telling - caused other investors to put on trades that could benefit from the widening gap.
“Because Luna just happened, it, it was very much a contagion where people were like, OK, are there people who are also leveraged long staked Ether versus Ether who will get liquidated as the market goes down?” Zhu said. “So the whole industry kind of effectively hunted these positions, thinking that, you know, that because it could be hunted essentially.”
Still, the fund was able to continue borrowing from large digital-asset lenders and wealthy investors - until, that is, they blew themselves up.
After Luna’s implosion, Zhu said lenders were “comfortable” with 3AC’s financial situation, and that they allowed them to keep trading as “as if nothing was wrong.” As courts filings have now revealed, many of these loans had required only a very small amount of collateral.
“So I just think that, you know, throughout that period, we continued to do business as usual. But then yeah, after that day, when, you know, Bitcoin went from US$30,000 to US$20,000, you know, that, that was extremely painful for us. And that was in, that ended up being kind of the nail in the coffin.”
From $10 billion to zero: How a crypto hedge fund collapsed and dragged many investors down with it
As recently as March, Three Arrows Capital managed about $10 billion in assets, making it one of the most prominent crypto hedge funds in the world.
Now the firm, also known as 3AC, is headed to bankruptcy court after the plunge in cryptocurrency prices and a particularly risky trading strategy combined to wipe out its assets and leave it unable to repay lenders.
The chain of pain may just be beginning. 3AC had a lengthy list of counterparties, or companies that had their money wrapped up in the firm’s ability to at least stay afloat. With the crypto market down by more than $1 trillion since April, led by the slide in bitcoin and ethereum, investors with concentrated bets on firms like 3AC are suffering the consequences.
Crypto exchange Blockchain.com reportedly faces a $270 million hit on loans to 3AC. Meanwhile, digital asset brokerage Voyager Digital filed for Chapter 11 bankruptcy protection after 3AC couldn’t pay back the roughly $670 million it had borrowed from the company. U.S.-based crypto lenders Genesis and BlockFi, crypto derivatives platform BitMEX and crypto exchange FTX are also being hit with losses.
“Credit is being destroyed and withdrawn, underwriting standards are being tightened, solvency is being tested, so everyone is withdrawing liquidity from crypto lenders,” said Nic Carter, a partner at Castle Island Ventures, which focuses on blockchain investments.
Three Arrows’ strategy involved borrowing money from across the industry and then turning around and investing that capital in other, often nascent, crypto projects. The firm had been around for a decade, which helped give founders Zhu Su and Kyle Davies a measure of credibility in an industry populated by newbies. Zhu also co-hosted a popular podcast on crypto.
“3AC was supposed to be the adult in the room,” said Nik Bhatia, a professor of finance and business economics at the University of Southern California.
Court documents reviewed by CNBC show that lawyers representing 3AC’s creditors claim that Zhu and Davies have not yet begun to cooperate with them “in any meaningful manner.” The filing also alleges that the liquidation process hasn’t started, meaning there’s no cash to pay back the company’s lenders.
Zhu and Davies didn’t immediately respond to requests for comment.
Tracing the falling dominoes
The fall of Three Arrows Capital can be traced to the collapse in May of terraUSD (UST), which had been one of the most popular U.S. dollar-pegged stablecoin projects.
The stability of UST relied on a complex set of code, with very little hard cash to back up the arrangement, despite the promise that it would keep its value regardless of the volatility in the broader crypto market. Investors were incentivized — on an accompanying lending platform called Anchor — with 20% annual yield on their UST holdings, a rate many analysts said was unsustainable.
The flowchart shows the crypto firms affected by the implosion of TerraUSD and 3 Arrows Capital's bankruptcy filing.
“The risk asset correction coupled with less liquidity have exposed projects that promised high unsustainable APRs, resulting in their collapse, such as UST,” said Alkesh Shah, global crypto and digital asset strategist at Bank of America.
Panic selling associated with the fall of UST, and its sister token luna, cost investors $60 billion.
“The terraUSD and luna collapse is ground zero,” said USC’s Bhatia, who published a book last year on digital currencies titled “Layered Money.” He described the meltdown as the first domino to fall in a “long, nightmarish chain of leverage and fraud.”
3AC told the Wall Street Journal it had invested $200 million in luna. Other industry reports said the fund’s exposure was around $560 million. Whatever the loss, that investment was rendered virtually worthless when the stablecoin project failed.
UST’s implosion rocked confidence in the sector and accelerated the slide in cryptocurrencies already underway as part of a broader pullback from risk.
3AC’s lenders asked for some of their cash back in a flood of margin calls, but the money wasn’t there. Many of the firm’s counterparties were, in turn, unable to meet demands from their investors, including retail holders who had been promised annual returns of 20%.
“Not only were they not hedging anything, but they also evaporated billions in creditors’ funds,” said Bhatia.
Peter Smith, the CEO of Blockchain.com said last week, in a letter to shareholders viewed by CoinDesk, that his company’s exchange “remains liquid, solvent and our customers will not be impacted.” But investors have heard that kind of sentiment before — Voyager said the same thing days before it filed for bankruptcy.
Bhatia said the cascade hits any player in the market with significant exposure to a deteriorating asset and liquidity crunch. And crypto comes with so few consumer protections that retail investors have no idea what, if anything, they’ll end up owning.
Customers of Voyager Digital recently received an email indicating that it would be a while before they could access the crypto held in their accounts. CEO Stephen Ehrlich said on Twitter that after the company goes through bankruptcy proceedings, customers with crypto in their account would potentially receive a sort of grab bag of stuff.
That could include a combination of the crypto they held, common shares in the reorganized Voyager, Voyager tokens and whatever proceeds they’re able to get from 3AC. Voyager investors told CNBC they don’t see much reason for optimism.
Zhu Su’s Mansion In Singapore Is Reportedly Up For Sale Following 3AC’s Bankruptcy
According to Chinese reporter Colin Wu, Three Arrows co-founder Zhu Su is rumoured to have put up his mansion in Singapore for sale per some real estate agents, but it has not been indicated on any public platform.
A court order from the British Virgin Islands recently liquidated crypto hedge fund Three Arrows Capital (3AC) after weeks of trouble following the meltdown of TERRA/LUNA where the hedge fund had apparently opened a huge UST position in Terra’s Anchor Protocol.
Following 3AC’s liquidation, there is a rumour that its co-founder Zhu Su is now giving up his properties for sale, specifically the mansion he bought for his three-year-old son in 2021.
Zhu Su and his wife, Tao Yaqiong Evelyn, snagged the Good Class Bungalow (GCB) at Yarwood Avenue in Bukit Timah area in Singapore for S$48.8 million in December 2021 but finished processing it earlier this year. Notedly only a Singaporean can own one of such properties.
The building Spans 31,862 square feet, it is S$1,532 per square foot (psf), the property was deemed as a “trustee” for their child. The rumour has not been confirmed by Zhu Su himself as this is still a developing story.
MAS states 3AC’s investigation is still ongoing despite liquidation
Singaporean news website The Straits Times, reported earlier that Three Arrows Capital will face Singapore’s financial censure for giving false info and exceeding Assets under Management limit. 3AC was allowed to only serve up to 30 qualified investors and manage assets of approximately $250 million.
The regulator listed three breaches by the crypto hedge fund which includes 3AC’s failure to notify the Monetary Authority of Singapore (MAS) of changes made with the status of Mr Zhu and co-founder Kyle Davies in the firm before a deadline.
The hedge fund also provided allegedly false information; 3AC told the MAS it had moved the management of its fund to an unrelated offshore entity last year, but this was misleading because Zhu Su was a shareholder of both 3AC and the offshore entity.
Bitcoin has lost around 58% of its value in the second quarter of 2022, its worst quarterly loss in more than a decade. This is the worst quarterly performance for bitcoin since the third quarter of 2011 when it lost 68.1% of its value.
Meanwhile, ether is down 69.3% in the second quarter and is on track for its worst quarter on record, dating back to its inception in 2015. The price crash has led to hedge fund Three Arrows Capital, a Singapore-based hedge fund, entering liquidation while other companies have paused withdrawals for users amid liquidity issues.
Celsius Network hires advisors to prepare for potential bankruptcy
Celsius Network LLC has hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The New Jersey-based cryptocurrency lending company froze withdrawals and transfers earlier this month due to "extreme" market conditions, in the latest sign of the financial market downturn hitting the cryptosphere.
A separate report from CoinDesk said on Friday that Wall Street bank Goldman Sachs was looking to raise $2 billion from investors to buy distressed assets from Celsius.
The proposed deal would allow investors to buy the assets at potentially big discounts if the cryptocurrency lender files for bankruptcy, according to the report, which cited two people familiar with the matter.
Celsius had $11.8 billion in assets as of last month. The company and Alvarez & Marsal did not immediately respond to Reuters requests for comment.
The market for digital assets has in recent months been roiled by extreme volatility as investors dump risky assets on fears that aggressive interest rate hikes to tame stubborn inflation could plunge the economy into recession.
Three Arrows Faces Possible Insolvency After Unforeseen Liquidations: Report
Dubai-based crypto fund Three Arrows Capital is facing possible insolvency after incurring at least $400 million in liquidations, The Block reported Wednesday.
Three Arrows, popularly known as 3AC, was liquidated by crypto lending firms and is currently in the process of repaying lenders and other counterparties, according to the report.
The firm’s founders, Su Zhu and Kyle Davies, were two of the most vocal participants in the crypto markets in the past few years, making bets on non-fungible tokens (NFT), decentralized finance (DeFi) applications, layer 1 blockchain tokens and cryptocurrency companies.
Zhu seemed to address rumors on Twitter this morning. “We are in the process of communicating with relevant parties and fully committed to working this out,” he said, without giving specifics.
Tokens listed as investments on the 3AC site include ether (ETH), solana (SOL), and luna (LUNA).
Prices of these are down 77%, 90% and 99.7%, respectively, since lifetime highs, as per CoinGecko data.
3AC’s troubles come amid reports that crypto lender Celsius may be insolvent. The firm managed billions of dollars of user funds and may not possess enough capital to pay out investors.
One of these strategies Celsius used involved the usage of staked ether (stETH), a derivative tied to the ether that lost its peg and could have caused contagion risks, as reported.
Meanwhile, on-chain data suggests 3AC is selling its existing crypto positions to lower collateral requirements for certain positions. One of 3AC’s wallets has a debt totaling $183 million, blockchain data shows.
3AC did not respond to requests for comment at writing time.
Take a chill pill y'all, Mr Zhu Su is probably just siphoning monies from his shady business to fund Winnie Xi's soon-to-happen special military operation to take back Taiwan by force. ;)
There was plenty of time and opportunities to bail, then again I wonder how many diehard crypto holders actually chose to do so. Greed over rationality yo
Bitcoin drops below US$20,000 to lowest since December 2020
Bitcoin dropped below US$20,000 on Saturday (Jun 18) to its lowest level in 18 months, extending its slide as investors pull back from riskier assets amid rising interest rates.
The biggest cryptocurrency was down 7.1 per cent to US$18,993 at 9.06am GMT (5.06pm Singapore time), having earlier touched US$18,732, its lowest since December 2020.
It is down about 59 per cent this year, while rival cryptocurrency Ethereum-backed ether is down 73 per cent.
The digital currency sector has been pummelled this week after cryptocurrency lending company Celsius froze withdrawals and transfers between accounts.
The sector has also suffered losses after companies such as Coinbase Global, Gemini and Blockfi said they would lay off thousands of employees as investors ditch risky assets.
Crypto platform Zipmex files for bankruptcy protection in Singapore
July 29 (Reuters) - Southeast Asia-focused cryptocurrency exchange Zipmex said it had filed for bankruptcy protection in Singapore, becoming the latest victim of the global downturn in digital currencies.
Singapore-based Zipmex resumed withdrawals last week, a day after suspending them on July 20, and said it was working to address its exposure of $53 million to crypto lenders Babel Finance and Celsius.
Zipmex's solicitors submitted five applications on July 22 seeking moratoriums to prohibit legal proceedings against Zipmex for up to six months, the cryptocurrency exchange said on Wednesday.
Under Singapore law, such a filing grants companies an automatic moratorium for 30 days, or until a Singapore Court makes a decision on the application, whichever is earlier.
Zipmex, which operates in Singapore, Thailand, Indonesia and Australia according to its website, is the latest in a string of crypto players globally to run into difficulties following a sharp sell off in markets that started in May with the collapse of two paired tokens, Luna and TerraUSD.
Thailand's Securities and Exchange Commission said on Monday it was working with law enforcement to look into potential losses among the public after Zipmex temporarily suspended withdrawals.
Singapore's ambitious cryptocurrency sector, by some measures Asia-Pacific's largest, has also been shaken by the recent collapse of crypto fund Three Arrows Capital.
https://www.reuters.com/technology/crypto-platform-zipmex-files-bankruptcy-protection-singapore-2022-07-29/
Three Arrows founders, in hiding from death threats, on their bungled crypto gambles - and that US$50m yacht
After 5 weeks in hiding, the disgraced founders of Three Arrows Capital spoke extensively about the spectacular implosion of their once high-flying hedge fund, saying their bungled crypto speculation unleashed cascading margins calls on loans that should never have been made.
Zhu Su and Kyle Davies, both 35, first became friends in high school. They built 3AC into a crypto-trading behemoth before its collapse bankrupted creditors and exacerbated a selloff that foisted steep losses on mom-and-pop owners of Bitcoin and other tokens.
At times contrite and at times defensive, Davies and Zhu, speaking from an undisclosed location, described a systemic failure of risk management in which easy-flowing credit worsened the impact of wrong-way bets.
They acknowledged the collapse triggered widespread pain, but mostly talked around questions about the effect on others in the industry. Instead, they stressed they suffered deep losses while denying allegations they pulled money out of 3AC before it all blew up. “People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe,” Zhu said. “But they’re gonna, you know, say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true.”
Advisers in charge of liquidating the fund said in July 8 filings that Zhu and Davies hadn’t cooperated with them and that the founders’ whereabouts were unknown. Zhu said death threats had forced them into hiding. “That does not mean that we haven’t been communicating with all relevant authorities,” said Zhu in the telephone interview with Davies and two lawyers from Solitaire LLP. “We have been communicating with them from day one.”
The two declined to say where they were but one of the lawyers on the call said their ultimate destination is the United Arab Emirates, which has emerged as a hot spot for crypto.
In a wide-ranging interview, the former Credit Suisse traders detailed the events leading to their fund’s implosion, which itself set off a chain reaction that has cost institutions and small-time speculators billions of dollars.
“The whole situation is regrettable,” Davies said. “Many people lost a lot of money.”
Creditors of the fund, recently registered in the British Virgin Islands, filed paperwork saying they’re owed more than US$2.8 billion in unsecured claims. That figure is expected to rise significantly, court papers show. To date, liquidators overseeing the insolvency have gained control of assets worth at least US$40 million.
Zhu and Davies, long among the most vociferous crypto bulls in an industry known for extremes, put on trades – turbocharged by leverage – that put 3AC at the centre of a series of implosions that convulsed the crypto market as prices retreated this year from their highs last fall. “We positioned ourselves for a kind of market that didn’t end up happening,” Zhu said.
“We believed in everything to the fullest,” added Davies. “We had all of our, almost all of our assets in there. And then in the good times we did the best. And then in the bad times we lost the most.”
At the same time, they claim, they weren’t outliers. They describe a confluence of interrelated one-way bets and accommodative borrowing arrangements that all blew up at once, leading not just to their fund’s demise but to bankruptcy, distress and bailouts at firms like Celsius Network, Voyager Digital and BlockFi.
“It’s not a surprise that Celsius, ourselves, these kind of firms, all have problems at the same time,” Zhu said. “We have our own capital, we have our own balance sheet, but then we also take in deposits from these lenders and then we generate yield on them. So if we’re in the business of taking in deposits and then generating yield, then that, you know, means we end up doing similar trades.”
Efforts by Zhu and Davies to deflect blame are a sharp contrast to the pair’s previously relentless campaign of cheer-leading cryptoassets and belittling critics. Nerves were raked anew this week by creditor claims that the founders put a downpayment on a US$50 million yacht before the fund went under, a claim Zhu said is part of a smear campaign.
The boat “was bought over a year ago and commissioned to be built and to be used in Europe,” Zhu said, adding the yacht “has a full money trail.” He rejected the perception that he enjoyed an extravagant lifestyle, noting that he biked to work and back every day and that his family “only has two homes in Singapore.”
“We were never seen in any clubs spending lots of money. We were never seen, you know, kind of driving Ferraris and Lamborghinis around,” Zhu said. “This kind of smearing of us, I feel, is just from a classic playbook of, you know, when this stuff happens, when funds blow up, then you know, these are kind of the headlines that people like to play.”
Davies and Zhu acknowledged heavy losses related to trades in Luna and the now-defunct algorithmic stablecoin TerraUSD, saying they were caught by surprise at the speed of the collapse of these tokens.
“What we failed to realise was that Luna was capable of falling to effective zero in a matter of days and that this would catalyze a credit squeeze across the industry that would put significant pressure on all of our illiquid positions,” Zhu said.
In retrospect, Zhu said, the firm may have been too close to Terra’s founder, Do Kwon.
“We began to know Do Kwon on a personal basis as he moved to Singapore. And we just felt like the project was going to do very big things, and had already done very big things,” he said in describing the firm’s miscalculations. “If we could have seen that, you know, that this was now like, potentially like attackable in some ways, and that it had grown too, you know, too big, too fast.”
“It was very much like a LTCM moment for us, like a Long Term Capital moment,” Zhu said. “We had different types of trades that we all thought were good, and other people also had these trades,” Zhu said. “And then they kind of all got super marked down, super fast.”
One of those trades involved an Ethereum-linked token called staked ETH, or stETH - designed to be a tradable proxy for Ether and widely used in decentralized finance. While every stETH is meant to be redeemable for one Ether once long-awaited upgrades of the Ethereum blockchain take effect, the turmoil sparked by Terra’s collapse caused its market value to fall below that level. This, in turn - in Zhu’s telling - caused other investors to put on trades that could benefit from the widening gap.
“Because Luna just happened, it, it was very much a contagion where people were like, OK, are there people who are also leveraged long staked Ether versus Ether who will get liquidated as the market goes down?” Zhu said. “So the whole industry kind of effectively hunted these positions, thinking that, you know, that because it could be hunted essentially.”
Still, the fund was able to continue borrowing from large digital-asset lenders and wealthy investors - until, that is, they blew themselves up.
After Luna’s implosion, Zhu said lenders were “comfortable” with 3AC’s financial situation, and that they allowed them to keep trading as “as if nothing was wrong.” As courts filings have now revealed, many of these loans had required only a very small amount of collateral.
“So I just think that, you know, throughout that period, we continued to do business as usual. But then yeah, after that day, when, you know, Bitcoin went from US$30,000 to US$20,000, you know, that, that was extremely painful for us. And that was in, that ended up being kind of the nail in the coffin.”
More at https://www.businesstimes.com.sg/garage/three-arrows-founders-in-hiding-from-death-threats-on-their-bungled-crypto-gambles-and-that
From $10 billion to zero: How a crypto hedge fund collapsed and dragged many investors down with it
As recently as March, Three Arrows Capital managed about $10 billion in assets, making it one of the most prominent crypto hedge funds in the world.
Now the firm, also known as 3AC, is headed to bankruptcy court after the plunge in cryptocurrency prices and a particularly risky trading strategy combined to wipe out its assets and leave it unable to repay lenders.
The chain of pain may just be beginning. 3AC had a lengthy list of counterparties, or companies that had their money wrapped up in the firm’s ability to at least stay afloat. With the crypto market down by more than $1 trillion since April, led by the slide in bitcoin and ethereum, investors with concentrated bets on firms like 3AC are suffering the consequences.
Crypto exchange Blockchain.com reportedly faces a $270 million hit on loans to 3AC. Meanwhile, digital asset brokerage Voyager Digital filed for Chapter 11 bankruptcy protection after 3AC couldn’t pay back the roughly $670 million it had borrowed from the company. U.S.-based crypto lenders Genesis and BlockFi, crypto derivatives platform BitMEX and crypto exchange FTX are also being hit with losses.
“Credit is being destroyed and withdrawn, underwriting standards are being tightened, solvency is being tested, so everyone is withdrawing liquidity from crypto lenders,” said Nic Carter, a partner at Castle Island Ventures, which focuses on blockchain investments.
Three Arrows’ strategy involved borrowing money from across the industry and then turning around and investing that capital in other, often nascent, crypto projects. The firm had been around for a decade, which helped give founders Zhu Su and Kyle Davies a measure of credibility in an industry populated by newbies. Zhu also co-hosted a popular podcast on crypto.
“3AC was supposed to be the adult in the room,” said Nik Bhatia, a professor of finance and business economics at the University of Southern California.
Court documents reviewed by CNBC show that lawyers representing 3AC’s creditors claim that Zhu and Davies have not yet begun to cooperate with them “in any meaningful manner.” The filing also alleges that the liquidation process hasn’t started, meaning there’s no cash to pay back the company’s lenders.
Zhu and Davies didn’t immediately respond to requests for comment.
Tracing the falling dominoes
The fall of Three Arrows Capital can be traced to the collapse in May of terraUSD (UST), which had been one of the most popular U.S. dollar-pegged stablecoin projects.
The stability of UST relied on a complex set of code, with very little hard cash to back up the arrangement, despite the promise that it would keep its value regardless of the volatility in the broader crypto market. Investors were incentivized — on an accompanying lending platform called Anchor — with 20% annual yield on their UST holdings, a rate many analysts said was unsustainable.
The flowchart shows the crypto firms affected by the implosion of TerraUSD and 3 Arrows Capital's bankruptcy filing.
“The risk asset correction coupled with less liquidity have exposed projects that promised high unsustainable APRs, resulting in their collapse, such as UST,” said Alkesh Shah, global crypto and digital asset strategist at Bank of America.
Panic selling associated with the fall of UST, and its sister token luna, cost investors $60 billion.
“The terraUSD and luna collapse is ground zero,” said USC’s Bhatia, who published a book last year on digital currencies titled “Layered Money.” He described the meltdown as the first domino to fall in a “long, nightmarish chain of leverage and fraud.”
3AC told the Wall Street Journal it had invested $200 million in luna. Other industry reports said the fund’s exposure was around $560 million. Whatever the loss, that investment was rendered virtually worthless when the stablecoin project failed.
UST’s implosion rocked confidence in the sector and accelerated the slide in cryptocurrencies already underway as part of a broader pullback from risk.
3AC’s lenders asked for some of their cash back in a flood of margin calls, but the money wasn’t there. Many of the firm’s counterparties were, in turn, unable to meet demands from their investors, including retail holders who had been promised annual returns of 20%.
“Not only were they not hedging anything, but they also evaporated billions in creditors’ funds,” said Bhatia.
Peter Smith, the CEO of Blockchain.com said last week, in a letter to shareholders viewed by CoinDesk, that his company’s exchange “remains liquid, solvent and our customers will not be impacted.” But investors have heard that kind of sentiment before — Voyager said the same thing days before it filed for bankruptcy.
Bhatia said the cascade hits any player in the market with significant exposure to a deteriorating asset and liquidity crunch. And crypto comes with so few consumer protections that retail investors have no idea what, if anything, they’ll end up owning.
Customers of Voyager Digital recently received an email indicating that it would be a while before they could access the crypto held in their accounts. CEO Stephen Ehrlich said on Twitter that after the company goes through bankruptcy proceedings, customers with crypto in their account would potentially receive a sort of grab bag of stuff.
That could include a combination of the crypto they held, common shares in the reorganized Voyager, Voyager tokens and whatever proceeds they’re able to get from 3AC. Voyager investors told CNBC they don’t see much reason for optimism.
https://www.cnbc.com/2022/07/11/how-the-fall-of-three-arrows-or-3ac-dragged-down-crypto-investors.html
Zhu Su’s Mansion In Singapore Is Reportedly Up For Sale Following 3AC’s Bankruptcy
According to Chinese reporter Colin Wu, Three Arrows co-founder Zhu Su is rumoured to have put up his mansion in Singapore for sale per some real estate agents, but it has not been indicated on any public platform.
A court order from the British Virgin Islands recently liquidated crypto hedge fund Three Arrows Capital (3AC) after weeks of trouble following the meltdown of TERRA/LUNA where the hedge fund had apparently opened a huge UST position in Terra’s Anchor Protocol.
Following 3AC’s liquidation, there is a rumour that its co-founder Zhu Su is now giving up his properties for sale, specifically the mansion he bought for his three-year-old son in 2021.
Zhu Su and his wife, Tao Yaqiong Evelyn, snagged the Good Class Bungalow (GCB) at Yarwood Avenue in Bukit Timah area in Singapore for S$48.8 million in December 2021 but finished processing it earlier this year. Notedly only a Singaporean can own one of such properties.
The building Spans 31,862 square feet, it is S$1,532 per square foot (psf), the property was deemed as a “trustee” for their child. The rumour has not been confirmed by Zhu Su himself as this is still a developing story.
MAS states 3AC’s investigation is still ongoing despite liquidation
Singaporean news website The Straits Times, reported earlier that Three Arrows Capital will face Singapore’s financial censure for giving false info and exceeding Assets under Management limit. 3AC was allowed to only serve up to 30 qualified investors and manage assets of approximately $250 million.
The regulator listed three breaches by the crypto hedge fund which includes 3AC’s failure to notify the Monetary Authority of Singapore (MAS) of changes made with the status of Mr Zhu and co-founder Kyle Davies in the firm before a deadline.
The hedge fund also provided allegedly false information; 3AC told the MAS it had moved the management of its fund to an unrelated offshore entity last year, but this was misleading because Zhu Su was a shareholder of both 3AC and the offshore entity.
https://coingape.com/zhu-sus-mansion-in-singapore-is-reportedly-up-for-sale-following-3acs-bankruptcy/
Bitcoin has lost around 58% of its value in the second quarter of 2022, its worst quarterly loss in more than a decade. This is the worst quarterly performance for bitcoin since the third quarter of 2011 when it lost 68.1% of its value.
Meanwhile, ether is down 69.3% in the second quarter and is on track for its worst quarter on record, dating back to its inception in 2015. The price crash has led to hedge fund Three Arrows Capital, a Singapore-based hedge fund, entering liquidation while other companies have paused withdrawals for users amid liquidity issues.
Celsius Network hires advisors to prepare for potential bankruptcy
Celsius Network LLC has hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The New Jersey-based cryptocurrency lending company froze withdrawals and transfers earlier this month due to "extreme" market conditions, in the latest sign of the financial market downturn hitting the cryptosphere.
A separate report from CoinDesk said on Friday that Wall Street bank Goldman Sachs was looking to raise $2 billion from investors to buy distressed assets from Celsius.
The proposed deal would allow investors to buy the assets at potentially big discounts if the cryptocurrency lender files for bankruptcy, according to the report, which cited two people familiar with the matter.
Celsius had $11.8 billion in assets as of last month. The company and Alvarez & Marsal did not immediately respond to Reuters requests for comment.
The market for digital assets has in recent months been roiled by extreme volatility as investors dump risky assets on fears that aggressive interest rate hikes to tame stubborn inflation could plunge the economy into recession.
https://www.reuters.com/technology/celsius-network-hires-advisors-prepare-potential-bankruptcy-wsj-2022-06-24/
Three Arrows Faces Possible Insolvency After Unforeseen Liquidations: Report
Dubai-based crypto fund Three Arrows Capital is facing possible insolvency after incurring at least $400 million in liquidations, The Block reported Wednesday.
Three Arrows, popularly known as 3AC, was liquidated by crypto lending firms and is currently in the process of repaying lenders and other counterparties, according to the report.
The firm’s founders, Su Zhu and Kyle Davies, were two of the most vocal participants in the crypto markets in the past few years, making bets on non-fungible tokens (NFT), decentralized finance (DeFi) applications, layer 1 blockchain tokens and cryptocurrency companies.
Zhu seemed to address rumors on Twitter this morning. “We are in the process of communicating with relevant parties and fully committed to working this out,” he said, without giving specifics.
Tokens listed as investments on the 3AC site include ether (ETH), solana (SOL), and luna (LUNA).
Prices of these are down 77%, 90% and 99.7%, respectively, since lifetime highs, as per CoinGecko data.
3AC’s troubles come amid reports that crypto lender Celsius may be insolvent. The firm managed billions of dollars of user funds and may not possess enough capital to pay out investors.
One of these strategies Celsius used involved the usage of staked ether (stETH), a derivative tied to the ether that lost its peg and could have caused contagion risks, as reported.
Meanwhile, on-chain data suggests 3AC is selling its existing crypto positions to lower collateral requirements for certain positions. One of 3AC’s wallets has a debt totaling $183 million, blockchain data shows.
3AC did not respond to requests for comment at writing time.
https://sg.news.yahoo.com/three-arrows-faces-possible-insolvency-082215400.html
There was plenty of time and opportunities to bail, then again I wonder how many diehard crypto holders actually chose to do so. Greed over rationality yo
Bitcoin drops below US$20,000 to lowest since December 2020
Bitcoin dropped below US$20,000 on Saturday (Jun 18) to its lowest level in 18 months, extending its slide as investors pull back from riskier assets amid rising interest rates.
The biggest cryptocurrency was down 7.1 per cent to US$18,993 at 9.06am GMT (5.06pm Singapore time), having earlier touched US$18,732, its lowest since December 2020.
It is down about 59 per cent this year, while rival cryptocurrency Ethereum-backed ether is down 73 per cent.
The digital currency sector has been pummelled this week after cryptocurrency lending company Celsius froze withdrawals and transfers between accounts.
The sector has also suffered losses after companies such as Coinbase Global, Gemini and Blockfi said they would lay off thousands of employees as investors ditch risky assets.
https://www.channelnewsasia.com/business/bitcoin-drops-below-us20000-lowest-december-2020-2755381
Guess it won't be long before it dips below the 19K.
Uh oh looks it's going to be very crowded at Bedok Reservoir for the next few days.....