Three Arrows Capital (3AC) has defaulted on a $670 million loan. Voyager Digital (TSX: VOYG) (OTCQX: VYGVF) , a digital asset firm that had previously warned it had exposure to 3AC in regards to 15,250 Bitcoin (~$308 million) and $350 million (USDC) for over $650 million in assets. 3AC is a crypto hedge fund with positions in many different, well known digital asset firms.
In a release, Voyager stated that its subsidiary, Voyager Digital LLC, has issued a notice of default to 3AC for failure to make the required payments on its loan. Voyager said that it intends to pursue recovery from 3AC and is in discussions with the company’s advisors as to legal remedies available.
Stephen Ehrlich, Chief Executive Officer of Voyager, issued the following comment:
“We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands.”
Voyager said that it had accessed USD $75 million of the line of credit made available by Alameda, a trading firm is owned by FTX founder and CEO Sam Bankman-Fried.
Earlier this month, Voyager announced that it had entered into an agreement with Alameda for a $200 million cash and USDC revolver along with a 15,000 BTC revolver.
Voyager said that it may continue to make use of the Alameda facilities to facilitate customer orders and withdrawals, as needed.
Voyager added that it continues to operate and fulfill customer orders and withdrawals. As of June 24, 2022, Voyager reported that it had approximately USD $137 million cash and owned crypto assets on hand.
Shares in Voyager sank further on the news trading down by around 16% today at around $0.485 a share with a market cap of under $100 million. At the beginning of the year, Voyager traded for over $12 a share.
3AC is based in Dubai – a crypto-friendly jurisdiction but registered in Singapore. founded by Su Zhu and Kyle Davies. On June 14th, Zhu vaguely tweeted that they were in the process of “communicating with relevant parties and fully committed to working this out.” A report in WSJ.com indicated that 3AC at one point had $200 million in LUNA tokens that have since vaporized. He told the publication the collapse had “caught them off guard.” At one point, 3AC reportedly held $10 billion in assets.
In early 2022, Three Arrows Capital announced the launch of Fund III stating:
“Three Arrows Capital approach has three pillars: Invest like a venture capitalist in initial coin offerings (ICOs), trade on news and events by moving in and out of tokens rapidly and, critically, exploit insider relationships and marketing hype to ensure profitability. The firm’s rise speaks volumes about the anything-goes world of cryptocurrencies, where the stated ideals of democratization are a joke and being an insider is the surest path to riches.”
The collapse of firms like 3AC and others has raised concerns about crypto contagion. Bankman-Fried’s willingness, and ability, to backstop digital asset firms impacted by the crypto market decline has led him to be described as the crypto Fed – the lender of last resort.