Voyager Digital today announced it may issue a “notice of default” to the struggling crypto investment firm Three Arrows Capital (3AC) if it fails to make a loan repayment.
Shares in the New York-based crypto platform plunged by more than 60% after it revealed that its exposure to 3AC comprises 15,250 BTC (approximately $311 million at current prices) and $350 million in USDC.
The New York-based firm claims it made an initial request for a repayment of $25 million in USDC by June 24, 2022, with a subsequent request of repayment of the entire amount owed in USDC and BTC by June 27, 2022.
“Neither of these amounts has been repaid, and failure by 3AC to repay either requested amount by these specified dates will constitute an event of default,” reads the statement.
Voyager added that it “intends to pursue recovery from 3AC” and is currently in discussions with its advisors “regarding the legal remedies available.”
The firm, however, conceded that it’s “unable to assess at this point the amount it will be able to recover from 3AC.”
Last week, Voyager secured a revolving line of credit from Alameda Research, including a cash/USDC-based credit facility with an aggregate principal amount of US$200 million, and a revolving credit facility for 15,000 BTC.
Is 3AC insolvent?
Singapore-based 3AC—one of the largest crypto hedge funds, at least until recently—was rumored to be on the brink of insolvency after reportedly failing to meet margin calls from several lenders, including BlockFi and financial services company Genesis Trading.
While BlockFi did not directly confirm it had taken action on Three Arrows’ position, the firm’s CEO Zac Prince tweeted last Thursday that a “large client… failed to meet its obligations on an overcollateralized margin loan.”
“We fully accelerated the loan and fully liquidated or hedged all the associated collateral,” Prince said, adding that “no client funds are impacted.”
BlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.
Genesis Trading CEO Michael Moro followed with a similar message the following day, with more of 3AC’s large lenders, including crypto exchange BitMEX, confirming they had liquidated their positions with the investment firm.
Although 3AC has been largely silent on its apparent liquidity crisis, co-founder Kyle Davies told the Wall Street Journal on Friday that the firm has hired legal and financial advisers “to help work out a solution for its investors and lenders.”
Davies also suggested 3AC may have several options on the table, including asset sales or a possible bailout by another firm.
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