đ„Crypto, Tech & Housing Are Crackingđ„
Three Arrows Capital, Enjoy Technology Inc. & First Guaranty Mortgage Corporation file for BK.
Weâre supposed to be off this weekend but these things caught our attention and we felt compelled to cover them without delay. Enjoy this (a$$-kicking) PETITION briefing and have a safe and joyous July 4th weekend. Cheers.
đ€New Chapter 15 Bankruptcy Filing - Three Arrows Capital LTDđ€
Clearly that âŹïž didnât age well. It was Mr. Suâs last tweet.
On June 29, 2022, the Eastern Caribbean Supreme Court in the BVI High Court of Justice (Commercial Division) entered an order formalizing the appointment of Teneo Ltd. as liquidators of Zhu Suâs Three Arrows Capital Ltd. (â3ACâ).
3AC then commenced a Chapter 15 bankruptcy proceeding in the Southern District of New York to recognize the foreign main BVI proceeding and impose an automatic stay against US-based creditors.
Incorporated back in 2012 under the laws of the British Virgin Islands by Kyle Davies and Zhu Su (both of whom appear to be on the lam, having reportedly left Singapore and now potentially chillinâ in Dubai),* 3AC is was a hedge fund heavily invested in cryptocurrency; as of the petition date, it had $3b in assets under management (âAUMâ)** and levered itself to the tits as part of its investment strategy. Many of those loan agreements have New York as their âchoice of lawâ for governance purposes (hence the venue).
When we say that 3AC was âlevered to the titsâ what we specifically refer to is the apparent fact that 3AC heavily borrowed digital and fiat currency from multiple lenders to fund its crypto investments. According to 3ACâs liquidator, apparently a substantial portion of 3ACâs investment portfolio was in Luna, a sister cryptocurrency to the TerraUSD âstablecoinâ that infamously blew up just a few weeks ago after breaking its dollar peg causing both to lose all of their value.*** This shattered confidence in the crypto markets and, for those invested all across the crypto stack, there was no place to hide. Even âblue chipâ (ugh) cryptocurrencies got pummeled. 3AC was invested in many of them â from BTC to ETH to Solana. These events triggered defaults with several lenders, many of which liquidated 3ACâs positions. By mid-June 2022, 3AC âwas rumored to be facing more than $400 million in liquidations.â And none of this was in the background: indeed, many of 3ACâs lenders publicly acknowledged exposure to the fund. Foremost among them? NJ-based Voyager Ltd.
Which may soon find itself in bankruptcy too if recent announcements are any indication.
In addition to Luna, 3AC was also reportedly heavily invested in âLido Staked etherâ tokens and Grayscale Bitcoin Trust ($GBTC). Per the WSJ:
Hedge funds such as Three Arrows invested in Grayscale to arbitrage the difference between the value of the trust and bitcoin, whose value it tried to mimic. The Grayscale trade suffered as the trust faced competition from investment products created for everyday investors. Grayscale Bitcoin Trust, which traded at a premium to bitcoin in the past, was trading at a 29% discount to bitcoinâs price as of Monday, according to YCharts data.Â
Um, yeaaaaaah, this chart âŹïž is something else: