Three Arrows Capital’s defeat in full review: the impact on the crypto market is coming to an end

On July 12, Zhu Su, founder of Three Arrows Capital, who had been silent for nearly a month, tweeted again: “Unfortunately, our sincerity in cooperating with liquidators has been misled. I hope they (liquidators) will have options in StarkWare tokens. Perform good faith in the certificate.”

Three Arrows Capital's defeat in full review: the impact on the crypto market is coming to an end

In the tweet (user comments have been restricted), Zhu Su also attached two screenshots of the email, showing that he wanted to liquidate according to the process, but Russell, the creditor and liquidator, pretended to help and agreed on a liquidation plan, in fact, he obtained internal information, And submit the materials in the coordination process to the court, which hinders the liquidation process.

The lawyer of Three Arrows Capital also said that the failure of creditors to fulfill the commitment to the acquisition of StarkWare equity caused the company to suffer losses, which had a series of adverse effects.

Zhu Su’s “appearance” can be said to be a response to the recent rumors of complete loss of contact.

On July 8, Teneo, a financial consulting firm, said in a document submitted to the Bankruptcy Court for the Southern District of New York that the founders of Three Arrows, Zhu Su and Kyle Davies, refused to cooperate with the liquidation and their whereabouts were unknown. The two may try to transfer the company’s assets. to an external account (to escape debt). The news that the two founders lost contact has also been confirmed by lawyers Sanjianfang. In addition, it has been nearly a month since Zhu Su appeared on the social platform for the last time (June 15), and the rumors and discussions about Zhu Su have intensified. .

But apart from this self-explaining tweet from the liquidator, there was no new response from Sanjianfang, and neither founder attended a court hearing in New York on July 12.

In the end, the U.S. court froze the remaining assets of Three Arrows in the United States and designated Teneo as the bankruptcy liquidator with the right to dispose of the relevant assets. The latest news is that the first meeting of Three Arrows creditors hosted by Teneo will be held on July 18. The specific agenda is not yet clear, but the follow-up progress will be announced on the designated official website ( .

The fall of Luna accelerated the bear market, and then several CeFi institutions fell one after another like dominoes. However, for more than a month, Celsius has continued to repay more than 800 million US dollars in various DeFi protocols, and successively redeemed collaterals. BlockFi has also obtained multiple rounds of loans and confirmed that it will be acquired by FTX, and some other small and medium-sized institutions have also made progress… Only the “initiator” Three Arrows, related gossips emerge one after another, forming a suspenseful drama.

As a top fund that managed tens of billions of dollars in assets in the past, how big is Sanjian’s liabilities, who are the creditors, and how many assets are still on the account? Creditors sued Sanjian, can they get back some of the debts? What are the difficulties of the game between the two sides? Is the impact of the Three Arrows debt crisis on the crypto financial market nearing an end? Odaily Planet Daily will try to answer the above questions based on the information of all parties.

(1) Three Arrows and His Creditors

“We are communicating with relevant parties and are committed to solving the problem.” On June 15, Zhu Su, founder of Three Arrows Capital, disappeared after leaving the tweet. At that time, Sanjian was rumored to be in a liquidity crisis and became insolvent, causing market panic. Zhu Su’s tweet undoubtedly verified some of the speculation.

The root cause of the rout is that Three Arrows misjudged the situation and continued to long Bitcoin and other encrypted assets by means of revolving mortgage lending and increasing leverage. As the market went down, huge margins and collateral were liquidated one after another, and the LUNA previously invested in also lost money. Hundreds of millions of dollars directly led to the drying up of liquidity, which in turn triggered a market spiral down, with Bitcoin falling below $18,000 at a minimum. Odaily Planet Daily once wrote an article to analyze the defeat of Three Arrows, and recommends reading “Three Arrows Capital Failure: ETH’s No. 1 Holder in a Liquidity Crisis”.

Regarding the specific scale of Sanjian’s debt, the market does not have a clear understanding of it. In particular, some creditors are afraid of causing users to panic and run, and they dare not take the initiative to expose what they know, and even clear their relationship with Sanjian.

In the past month, as market sentiment stabilized, a series of incidents were gradually resolved, and the creditors of Three Arrows also surfaced one after another: Voyager Digital, BlockFi, Deribit,, Genesis, DeFiance Capital, TureFi, and a number of three Arrow Investment’s DeFi protocol.

The one with the highest debt is the crypto broker Voyager Digital. The company lent Three Arrows unsecured loans of 15,250 bitcoins and 350 million USDC, with a total value of about $655 million if BTC is calculated at $20,000. On the day the news came out, Voyager Digital’s stock price plummeted by more than 60%, and the cumulative decline so far has reached 86%.

As the flow of funds dried up, Voyager Digital on the one hand reduced the daily withdrawal limit from $25,000 to $10,000 and limited the number of daily withdrawals; on the other hand, it sought short-term debt support from Alameda and received $200 million and $15,000. BTC revolving credit line, but failed to save the edifice. On July 6, Voyager Digital announced the suspension of all customer transactions, deposits and withdrawals, and loyalty rewards, and officially started the bankruptcy reorganization process and filed for bankruptcy protection. assets.

But how much cryptocurrency customers will eventually get back remains an unknown.

From the most promising crypto-economic business in North America in the past, to bankruptcy and liquidation, what happened to Voyager Digital is not very sad. Another encrypted lending platform, BlockFi, is also facing a situation of being acquired at a low price because of Three Arrows debt.

According to the leaked recording of the Morgan Creek investor conference call, BlockFi had provided a loan of about $1 billion to Three Arrows, the collateral was two-thirds Bitcoin and one-third GBTC, and the over-collateralization ratio was 30%; As the price of BTC fell, BlockFi liquidated Sanjian’s collateral, and the exact loss is unknown. After Sanjian went bankrupt, BlockFi also actively sought external financing, but the latest valuation given by several parties was far lower than BlockFi’s $5 billion valuation last year. In the end, BlockFi chose FTX US ($240 million acquisition option + $400 million revolving credit line), and plans to complete the acquisition in the fall of 2023.

Creditors of Three Arrows, as well as several trading platforms and crypto market makers. Among them, the cryptocurrency trading platform faced a loss of $270 million for providing loans to Three Arrows Capital. The company announced that its liquidity was sufficient and customers were not affected.

The cryptocurrency market maker and lender Genesis also lost hundreds of millions of dollars, though its parent company, Digital Currency Group (DCG), was deep-pocketed and took on some of the debt to keep it afloat.

Deribit, an encrypted derivatives platform, made it clear that Sanjian, as a shareholder of its parent company, does have liabilities on a few accounts of the company, but this will not affect its operations. Deribit is financially healthy and willing to bear losses.

The reason for the loss of trading institutions is that when the market falls below the liquidation line, these institutions do not immediately liquidate the margin of the three arrows, but give them time to cover their positions (a common practice in the industry), but in the end, the three arrows bounced and caused losses .

In addition, Sanjian was also exposed to misappropriation of client funds. Danny, head of trading at 8 BlocksCapita, said that while trading on a Three Arrows trading account, Three Arrows took about $1 million from the account.

According to 3AnonCompany, an anonymous source, Sanjian has launched structured credit products with a yield of 10% – 15% since its establishment in 2018. “Lenders include small trading platforms, individuals and companies, and Sanjian always deals with counterparties. It’s the skillful misappropriation of customers’ money as if it were your own.” Some Sanjian investment projects will also return the investment funds to Sanjian for financial management, including Kyber Network, encrypted savings application Finblox, etc., but the whereabouts of these funds are currently unknown.

Three Arrows’ creditors also include: institutional lending platform TureFi, with $2 million, originally scheduled to repay in August; Web3 venture capital firm DeFiance Capital, whose specific debt is unknown; TPS Capital, the over-the-counter (OTC) division of Three Arrows Capital, also issued a document. Said to be one of the debtors of Three Arrows Capital.

According to Terra researcher FatMan, the total debt of Three Arrows is about $2 billion, the existing assets are about $400 million, and the debt is $1.6 billion; the anonymous 3AnonCompany tweeted that Three Arrows currently has a total of more than $2 billion. Outstanding debt, but only 200 million in liquid assets (difficult to assess actual repayable figures due to illiquidity).

(2) Multiple lawsuits vs bankruptcy protection

On June 24, Voyager Digital issued a default notice to Three Arrows Capital, but did not receive any feedback, which also cast a shadow on the creditors’ hearts. Although many creditors have tried to liquidate the assets of Sanjian in the first time, they still failed to make up for their losses in time.

As the debt gap of Three Arrows is getting bigger and bigger, creditors can’t sit still and start to sue in many places, trying to get priority compensation. DeFiance Capital said it is considering legal action against Three Arrows Capital, or in the form of arbitration, litigation or amendments to bankruptcy proceedings, to require Three Arrows Capital to repay as a creditor. and Deribit were among the first to be the first defenders to file a lawsuit in the British Virgin Islands (BVI) seeking liquidation of all Three Arrows assets. “We believe that Three Arrows has defrauded the crypto industry and intend to hold them accountable to the fullest extent of the law, and we have applied for the immediate liquidation of all of Three Arrows’ global assets.” (Note: Three Arrows is headquartered in Singapore, but in the UK Incorporated in the Virgin Islands and sued under the principle of territorial jurisdiction.)

On Monday, July 1, the BVI court ordered all assets of Three Arrows to be liquidated, and appointed global consultancy Teneo Restructuring to manage the insolvency of 3AC – which focuses on protecting the assets of liquidated companies and determining who its creditors are. Teneo then appointed two partners, Russell Crumpler and Christopher Farmer, as joint liquidators, and set up a website through which creditors can file claims against Three Arrows, and related matters will also be synchronized on the website.

At the same time, the Monetary Authority of Singapore (MAS), where Three Arrows is headquartered, also issued a warning to it and will investigate its violations. ( -threshold) The official announcement stated that Three Arrows Capital provided false information and its assets under management (AUM) exceeded the limit of registered fund management companies. Specifically, Three Arrows has handed over the management of its fund to an unrelated offshore entity since September 1, 2021, without notifying the HKMA of changes in directors and shareholding; in addition, Three Arrows has long violated the AUM threshold , exceeding its allowed RFMC AUM of S$250 million. “MAS is assessing whether it has further breached MAS’s rules.”

Three Arrows Capital's defeat in full review: the impact on the crypto market is coming to an end

MAS announcement

Three Arrows also took countermeasures. To avoid jail time, Zhu Su partnered with Advocatus Law LLP, a Singaporean law firm specializing in white-collar crime cases, led by co-founder Christopher
( ). -law-llp/34824-singapore-singapore/lawyers/491439-christopher-anand-daniel/) as lead counsel for Three Arrows debt prosecution issues. Christopher, who took office but has deep experience, filed for bankruptcy in the New York court under Chapter 15 of the United States Bankruptcy Code (Chapter 15) to protect the assets of Three Arrows in the United States.

It needs to be emphasized that there are usually the following types of bankruptcy liquidation in the United States: Chapter 7, direct liquidation and bankruptcy, the company will immediately enter the liquidation process; Chapter 11, the company can negotiate with creditors about restructuring; and Chapter 15 applied by Three Arrows It is usually a secondary bankruptcy procedure for a foreign individual or entity. Luckin Coffee has used this trick before. The main process of bankruptcy is carried out in the home country of the foreign company (Singapore, the headquarters of Three Arrows). Before the liquidation is completed, three Arrow’s U.S. assets cannot be acquired by other creditors.

The purpose of Three Arrows is obviously not concealed from creditors. In order to prevent Three Arrows from transferring assets by itself, the joint creditors filed a lawsuit with the Bankruptcy Court for the Southern District of New York, requesting to freeze the remaining assets of Three Arrows Capital in the United States. According to the documents submitted by the creditors, the two founders of Three Arrows did not cooperate with the liquidation process, and they refused to communicate during the conference call, and asked the lawyer to come forward; the creditor’s lawyer who visited the Singapore office of Three Arrows Group found that the office had been closed Abandoned; Zhu Su and Kyle Davies are unaccounted for and there is a high risk that they may attempt to transfer the company’s assets to an external account.

To this end, the New York court held an emergency hearing for creditors. Neither founder attended. In the end, the court granted creditors Provisional relief to prevent Three Arrows from transferring and disposing of assets in the United States, and appointed Teneo as the bankruptcy liquidator. Have the right to dispose of the relevant assets (note: under the “interim relief”, the foreign representative has the right to issue a subpoena to the founder of Three Arrows, requiring him to produce documents and testimony).

In response to the creditor’s “whereabouts unknown”, Zhu Su counterattacked, and posted two screenshots of the emails of his attorney and the debt liquidator (Teneo) ( 1546801270014758912):

The first email indicated that Zhu Su “disappeared” because of “threats of physical violence” he and his family received, and “has been under a lot of pressure” in the face of MAS inquiries, but the debt liquidator did not This situation is truthfully reported to the court;

A second email revealed that the liquidators did not enforce the agreed StarkWare token warrant treaty, which “caused [3AC] to lose substantial value.” Three Arrows participated in StarkWare’s $75 million Series B financing in March 2021, the warrants expired on July 5, and now Starkware Token is gone because the liquidator failed to honor the StarkWare Token takeover offer.

Three Arrows Capital's defeat in full review: the impact on the crypto market is coming to an end

Two emails posted by Zhu Su

Right and wrong, both sides hold their own opinions, and there is no conclusion at present. The latest news is that the first meeting of Three Arrows Capital’s creditors will be held on July 18. The meeting will be hosted by Teneo. The specific agenda of the meeting is not yet clear, but the latest news will be synchronized on a dedicated website (https: //

(3) What are the difficulties in liquidation?

Although creditors have won the support of local courts, the bankruptcy and liquidation of Three Arrows this time is destined to fail to satisfy creditors.

Different from bankruptcy liquidation in the traditional financial world, encrypted finance has its special features, mainly in the recovery of assets on the chain.

Without the cooperation of the founders, the liquidator cannot fully understand all the encrypted assets of Sanjian, and some transferable tokens remaining in the wallet on the chain cannot be seized, and even the founders or other parties may secretly transfer them. Currently, the NFTs of Starry Night, an NFT fund owned by Three Arrows, have been transferred to a new wallet for unknown reasons.

For creditors, the few assets that can be seized include:

One is GBTC assets. The current market price of GBTC is $13.13 per share, and the fair market value is $18.98, a discount of more than 30%; according to the announcement in early 2021, Sanjian holds more than 10% of the GBTC share, and the exact proportion is currently unknown. Once this part of the assets is liquidated to repay the debt, it is bound to further suppress the price of GBTC.

The second is exchange or custody account assets. Creditors can issue subpoenas to U.S.-based crypto exchanges to cooperate in liquidation, according to rights granted by the U.S. Bankruptcy Court. However, considering that BitMex,, FTX and other institutions have liquidated most of Sanjian’s collateral before, this part of the remaining assets may not be very large and have little impact on the market.

The third is to invest in equity/Token. Sanjian has invested in dozens of start-up companies before. There are still some unreleased Tokens in the contract, and there are also some project equity that has not been issued. These can be used as liquidation assets, but the liquidity is not high. In addition, some investment institutions (such as TPS Capital) have issued documents to clarify their relationship with Sanjian, which has also increased the difficulty of creditors’ recovery.

In addition to encrypted assets, the physical assets of Sanjian and Zhu Su cannot be ignored.

Registration records in Singapore ( show that Three Arrows Capital controls five high-end properties, including three GCB (Singapore Quality Bungalows), one shophouse and one townhouse , other assets include a fleet of high-end cars and a yacht (note: GCB is the top private residential real estate category in Singapore, with only about 2,800 in the whole of Singapore).

Three Arrows Capital's defeat in full review: the impact on the crypto market is coming to an end

Zhu Su’s Bungalow in Singapore

Among them, the property valued at $48.8 million in the name of Zhu Su’s daughter is held by the trust fund, and there is a new house under construction (valued at $28.5 million) in the name of Zhu Su’s wife. The yacht was purchased last year, valued at $50 million, and only paid down payment. Researcher FatMan ( tweeted that a source confirmed that Zhu Su was urgently trying to sell the mansion in his woman’s name and that he asked for the funds to be transferred to Dubai’s A bank account with no intention of paying creditors with the proceeds of the sale.

Other entity assets under Zhu Su’s name are currently unknown and require creditors to initiate lawsuits in courts around the world for investigation. At present, Teneo has transferred to East Asia and applied to the Singapore High Court for interim relief, allowing Teneo to manage the assets of Three Arrows in Singapore, and summoned co-founders Zhu Su and Kyle Davies. If the court approves, Sanjian and Zhu Su’s assets in Singapore will be frozen and cannot be transferred.

(4) Write at the end

In just two months, Three Arrows Capital has changed from a top fund in the industry that manages tens of billions of assets and calls for wind and rain, to a defendant with billions of debts and everyone yells at them. It is hard to help people sigh: the former wealthy is actually high leverage. , The false image piled up after the revolving loan.

The collapse of Three Arrows is by no means an isolated case. During this crisis, a number of centralized encryption institutions have exposed their long-established shortcomings: repeated use of leverage, unsecured credit loans, polygonal debt, misappropriation of user assets, various types of opacity The violations are endless.

The frequent occurrence of such cases will surely accelerate the supervision and review of cryptocurrencies. Today, the consequences of this round of violent reshuffle have been gradually realized in the market and are coming to an end. The market has stabilized recently, and we are also looking forward to the rebirth of the encrypted financial market.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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