The cryptocurrency has been hit hard by fears that a hike in interest rates will end the era of cheap money, with bitcoin, the world’s largest digital asset, down more than 56% from this year’s high. Many crypto companies have filed for bankruptcy or have been forced to seek emergency capital investments.
three arrow capital
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 downfall appears to stem from the firm’s bets on the Terra ecosystem, which was behind the failed stablecoin TeraUSD. That token lost almost its entire value in May, causing a loss of nearly half a trillion dollars from the crypto market.
High-leveraged, 3AC was unable to meet margin calls from counterparties from which it had borrowed. As a result, crypto lenders BlockFi and Genesis Trading terminated their positions with the firm. According to court filings, 3AC’s creditors claim they owe more than $2.8 billion.
New Jersey-based crypto lender Celsius suspended withdrawals on June 12 and filed for Chapter 11 bankruptcy a month later, listing a $1.19 billion loss on its balance sheet. It was valued at $3.25 billion in a funding round in October.
Celsius stumbled upon complex investments in the wholesale digital asset market. The company attracted retail investors by promising an 18.6% annual return, but struggled to meet redemptions as crypto prices plummeted.
In its first bankruptcy hearing, Celsius lawyers said that its bitcoin mining operations could provide a way for the company to repay customers.
Meanwhile, several state regulators are investigating Celsius’ decision to suspend customer withdrawals, Reuters reported.
Crypto lender Voyager Digital, also based in New Jersey, has been a rising crypto star, reaching a market cap of $3.74 billion last year. But the 3AC collapse dealt a major blow to Voyager, which had a huge impact on the hedge fund. Voyager has filed a claim of more than $650 million against 3AC.
Voyager filed for Chapter 11 bankruptcy on July 6, reporting that 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 deposit accounts for cryptocurrency purchases, which the company advertised as being FDIC-insured.
Crypto exchanges FTX and Alameda Research, both founded by billionaire Sam Bankman-Fried, offered to buy all of Voyager’s digital assets and loans, excluding its loans to 3AC, and allow Voyager customers to withdraw their assets from an FTX account. able to take. Voyager, however, dismissed that offer in the court filing as a “low-ball bid”.
Singapore-based crypto lender Wald filed for protection against its creditors in a Singapore court on July 8, days before it suspended withdrawals. According to a report in The Block, the company owes its creditors $402 million.
Wald is backed by billionaire investor Peter Thiel’s Weller Ventures, Pantera Capital and Coinbase Ventures.
In a July 11 blog post, Wald said it is discussing a possible sale to London-based crypto lender Nexo, while simultaneously exploring possible restructuring options.
Faced with a surge in withdrawals and a hit from 3AC, crypto lender BlockFi signed a deal with FTX on July 1, providing BlockFi with a $400 million revolving credit facility, and including an option that will allow FTX to buy the company for up to $240 million.
BlockFi was hit hard by the crypto crash, and in June implemented a number of cost-cutting measures, including reducing its headcount by 20% and cutting executive compensation. The company was valued at $3 billion in a funding round last year.