Cryptocurrencies have been hit hard by fears that rate hikes will end the era of cheap money, with the world’s largest digital asset, bitcoin, down more than 56% from this year’s peak. Several crypto companies have filed for bankruptcy or have been forced to seek emergency capital injections.
Singapore-based crypto hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy on July 1. Once a formidable player in the digital asset space, 3AC’s demise appears to stem from the company’s commitment to the Terra ecosystem, which was behind the failed stablecoin terraUSD. This token lost almost all of its value in May, wiping nearly half a trillion dollars from the crypto market.
Thanks to its leverage, 3AC was unable to meet margin calls from the counterparties it had borrowed from. As a result, cryptocurrency lenders BlockFi and Genesis Trading have liquidated their positions with the company. According to court documents, 3AC’s creditors say they owe more than $2.8 billion.
CELSIUS NETWORK New Jersey-based cryptocurrency lender Celsius suspended withdrawals on June 12 and filed for Chapter 11 bankruptcy a month later, with a $1.19 billion deficit on its balance sheet. During a financing round in October, it was valued at $3.25 billion. Celsius encountered complex investments in the wholesale digital asset market.
The company had attracted retail investors by promising annual returns of up to 18.6%, but struggled to cope with redemptions as crypto prices plummeted. At the first bankruptcy hearing, Celsius lawyers said its bitcoin mining operations could provide the company with a way to repay its customers. Meanwhile, several state regulators are investigating Celsius’s decision to suspend customer withdrawals, Reuters reported.
Also based in New Jersey, crypto lender Voyager Digital was a rising crypto star, reaching a market cap of $3.74 billion last year. But the collapse of 3AC was a serious blow to Voyager, which was heavily exposed to the hedge fund. Voyager has filed claims of more than $650 million against 3AC.
Voyager filed for Chapter 11 bankruptcy on July 6, indicating it had $110 million in cash and crypto assets. Since then, the US Federal Deposit Insurance Corp. has confirmed that it is investigating Voyager’s marketing of cryptocurrency purchase deposit accounts, which the company has advertised as FDIC-insured.
Crypto exchange FTX and Alameda Research, both founded by billionaire Sam Bankman-Fried, have offered to buy all of Voyager’s digital assets and loans, except the loans to 3AC, and allow Voyager customers to use their assets from an FTX account. to include. Voyager, however, rejected this offer in a lawsuit as a “offer at a low price”.
Singapore-based cryptocurrency lender Vauld filed for creditor protection in a Singapore court on July 8, after suspending withdrawals days earlier. The company owes creditors $402 million, according to a report by The Block. Vauld is backed by billionaire investor Peter Thiel Valar Ventures, Pantera Capital and Coinbase Ventures. In a July 11 blog post, Vauld said he was discussing a potential sale to London-based cryptocurrency lender Nexo as he explored possible restructuring options.
Facing increased withdrawals and a hit from 3AC, cryptocurrency lender BlockFi signed an agreement with FTX on July 1, providing BlockFi with a $400 million revolving credit facility and an option that allows FTX to buy the company for up to $240 million.
BlockFi was hit hard by the crypto crash and implemented several cost-cutting measures in June, including a 20% cut in its workforce and a cut in executive pay. The company was valued at $3 billion in a financing round last year.