After a difficult week, crypto hedge fund Three Arrows Capital (3AC) has hired legal and financial advisers to help work out the best way to manage losses from a broader market selloff in digital assets, according to reports.
3AC co-founder Kyle Davies told The Wall Street Journal on Friday that the firm was “committed to working things out and finding an equitable solution for all our constituent [sic].”
“We have always been believers in crypto and we still are,” Davies said.
Founded in 2012 by former classmates Su Zhu and Davies, 3AC had grown into one of the biggest and best-known crypto hedge funds. Still, last month's collapse of the Terra ecosystem resulted in a significant hit for 3AC as its investment in Terra's native luna token sank to almost zero. Davies told the Journal that the firm had put $200 million into Luna.
Davies said that the Terra-Luna situation caught the firm “very much off guard.”
The WSJ also reported comments from Davies indicating that the hedge fund is exploring both asset sales and a rescue by another company. It is also trying to reach agreements with creditors, which could buy it time.
It has brought on Nichol Yeo, a partner at the law firm Solitaire LLP to advise.
Sources had told The Block earlier on Friday that crypto exchanges FTX, Deribit and BitMEX had liquidated Three Arrows Capital's positions over the past week, after the crypto hedge fund failed to meet margin calls.
The moves come amid a broader crypto market rout that has seen firms struggle to make good on their promises to clients. Earlier on Friday, Babel Finance suspended withdrawals, citing “liquidity pressures.”
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