The collapse of 3 Arrows Capital, one of the largest hedge funds in crypto, was more monumental than it was surprising. Just in March of 2022, 3AC managed assets worth about $10 billion. Now, 3 Arrows Capital owes about $3.5 billion to a long list of creditors.
The list of the biggest creditors further shocked the crypto community when it was released Monday. The list was included in an 1,157 page document filed by Teneo, the company chosen to oversee 3AC’s liquidation. Some of the information was already public like Voyager Digital’s $661 million exposure, but this list exposed even larger creditors. The bombshell filing revealed that the crypto broker, Genesis, filed a claim for a staggering $1.2 billion from 3AC. This is after the company liquidated another $1.14 billion in assets, meaning that 3AC owed the company a total of more than $2.34 billion. Digital Currency Group, the parent company of Genesis, assumed the entire remaining $1.2 billion claim.
The same day the document was made public, another creditor, Soldman Gachs on Twitter, claimed that even the controversial co-founder, Zhu Su filed a lawsuit against his own company for $5 million. He also said Chen Kaili Kelly, the wife of other co-founder, Kyle Davies, filed a claim for $66 million. Gachs mentioned a few other creditors that didn't appear on the liquidation document in his thread including Algorand, the proof of stake Layer 1 blockchain, and BlockFi, one of the top centralized crypto lending platforms.
List of 3 Arrows Capital's Creditors
Here is the still incomplete list of creditors released in the liquidation filing:
| Creditor | Principle Amount/Recall Amount | Liquidated Capital |
| Equities First Holdings LLC | US$31,133,100 US$38,841,600 US$45,745,300 US$44,339,500 | 1,000,000 GBTC.US 1,500,000 GBTC.US 2,000,000 GBTC.US' 2,000,000 GBTC.US |
| Voyager Digital LLC | 15,250 BTC 350,000,000 USDC | Unknown |
| Tower Square Capital Limited | 106.620552 BTC at 3.5% interest 52.32976266 BTC at 3.5% interest 13206.76723 USDC at 5% interest 1098257.337 USDT at 5% interest 23285.24488 USDT at 7% interest | Unknown |
| Ashla International Inc | 500 BTC 10,000,000 USDT | Unknown |
| Plutus Lending LLC | 10,000,000 USDT | Unknown |
| Connor Zautke | 12.7233 BTC 109.4143 ETH | |
| Stephen Zautke | 218.3534 BTC 1,735.3587 ETH | |
| LuneX Ventures LP | 88 BTC | |
| Kenrick Drijkoningen | 55 BTC US$250,000 | Unknown |
| Play Future Fund Limited | US$600,000 capital call | |
| Banton Overseas Limited | 150 BTC at 4% interest 387 ETH at 4% interest | Unknown |
| Moonbeam Foundation Ltd | 200,000 MOVR 10,000,000 GLMR | Unknown |
| Moonbase One Ltd | 7,000,000 USDC 10,000,000 USDC | Unknown |
| PureStake Ltd | 8,000,000 USDC | Unknown |
| Livetree Community Ltd | US$300,000 10,000 DOT | Unknown |
| Onchain Custodian | 30.18386678 BTC | Unknown |
| Singapore Bitget Pte Ltd | US$16,322,226 | US$6,615,000 |
| SBI Crypto Co Ltd | 362.82191561 BTC | 506.69 ETH |
| 210K Capital, LP | 67.43745958 BTC 0.76355046 BTC | Unknown |
| Hashkey Trading | 444,196.08 USDT | 69.21 BTC (accounted for in balance principle) |
| FalconX Ltd | US$65,474,982.33 | Unknown |
| Mirana Corp | US$13,062,418.07 | US$37,098,062.97 (accounted for in balance principle) |
| CoinList Services LLC | 35,000,000 USDC | Unknown |
| DRB Panama Inc | 1300 BTC 15,000 ETH | Lender indicated they are liquidating account |
| Genesis Asia Pacific Pte Ltd | US$2,360,302,065 | 2,125,794 shares of Grayscale Bitcoin Trust 446,928 shares in Grayscale Ethereum Trust 2,076,238 shares in Grayscale Bitcoin Trust 13,241,612 shares of Grayscale Bitcoin Trust 2,739,043.83 AVAX tokens 13,583,265 NEAR tokens |
| Arrakis Capital | 20,000,000 USDC | Unknown |
| Celsius Network | 50,226,027.40 USDC 25,118,150.68 USDC | Unknown |
How Did 3 Arrows Capital Collapse?
The implosion of 3 Arrows Capital is not exactly surprising after you see what the firm was doing with its funds. Its general strategy was to borrow money from creditors and invest in generally small and nascent crypto companies and projects. The profit potential for this strategy was massive but so was the risk. The fund's credibility was able to overshadow this shockingly risky strategy. It has been around for about a decade so the crypto community assumed it knew what it was doing.
The likely direct cause of 3AC's insolvency was the crash of terraUSD and Luna cryptocurrencies which cost investors upwards of $60 billion. 3AC claimed that it only invested $200 million in Luna but others in the industry claim the fund's exposure was almost 3 times that. The Luna collapse was probably merely the last straw that broke the fund because of its extremely overextended and overleveraged position. It may have only led to the first margin call or 2 which in turn led to more until 3AC was insolvent and $3.2 billion in the hole. This domino effect didn't stop with the fund. It rampaged through many of 3 Arrows Capital's top creditors and even made the large crypto exchange, Voyager file for bankruptcy.
What Will 3 Arrows Capital Do Next?
In short, the remaining assets held by 3 Arrows Capital will be liquidated and split between the remaining creditors. The effects that the collapse of 3AC brought to the crypto market are likely not over yet, however. The full list of creditors still hasn't been released, though it's likely most of the largest ones were included in this list. There are still multiple massive funds investing using similarly risky strategies too.
For example, Tether or USDT, the largest stablecoin in the world by a huge margin seems to be doing something similar. This was discovered the last time it released information on the contents of its reserves used to support the peg to the USD when it was forced to by the New York Attorney General after lying about its reserves for years. About half of the reserves (worth much more than 3AC ever managed) were in the form of commercial paper, a risky form of uncollateralized debt. It didn't even say which companies it lent to. Tether has been able to honor withdrawals through a couple of small bank runs since this info was revealed but this may not always be true. Hopefully, the crypto market learned a painful but extremely important lesson about leverage from the 3AC collapse and this won't happen again.
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About Henry Stater
Henry is an expert in all things crypto. He stays up to date with all the latest coins, platforms and technologies in the field. He has particular expertise in the burgeoning decentralized finance ecosystem and loves trying out all the new platforms. He also always follows major events in other financial markets and geopolitics as a whole, especially when an event’s effects ripple through the crypto market.