Fears that interest rate rises will end the age of cheap money have weighed heavily on cryptocurrencies, with bitcoin down more than 56% from this year’s peak. Several cryptocurrency firms have declared insolvency or have been forced to seek emergency cash injections.
Three Arrow Capital
Three Arrow Capital (3AC), a Singapore-based crypto hedge fund, filed for Chapter 15 bankruptcy on July 1.
Once a prominent participant in the digital asset field, 3AC’s demise looked to be the result of the company’s gamble on the Terra ecosystem, which was behind the unsuccessful stablecoin terraUSD. In May, that token lost virtually all of its value, wiping over half a trillion dollars off the crypto market.
Due to its high leverage, 3AC was unable to fulfill margin calls from counterparties from whom it had borrowed. As a result, crypto lenders BlockFi and Genesis Trading liquidated their stakes in the company. 3AC’s creditors allege they are due more than $2.8 billion, according to court records.
Celsius Networks froze withdrawals on June 12 and filed for Chapter 11 bankruptcy a month later, reporting a $1.19 billion loss on its financial sheet. In an October investment round, it was valued at $3.25 billion.
Celsius made a costly mistake in the wholesale digital asset market. The firm enticed ordinary investors by offering yearly returns of up to 18.6 percent, but it failed to pay redemptions when cryptocurrency values fell.
Celsius attorneys stated during the business’s first bankruptcy hearing that its bitcoin mining operations may provide a method for the company to compensate clients.
Meanwhile, numerous state authorities are looking into Celsius’ move to stop client withdrawals, according to Reuters.
Voyager Digital (VYGVQ.PK), situated in New Jersey, has been a rising crypto star, with a market worth of $3.74 billion last year. However, the collapse of 3AC inflicted a significant blow to Voyager, which was heavily invested in the hedge fund. Voyager has filed claims against 3AC totaling more than $650 million.
On July 6, Voyager filed for Chapter 11 bankruptcy, saying that the company has $110 million in cash and crypto assets on hand. Since then, the Federal Bank Insurance Corporation of the United States has acknowledged that it is investigating Voyager’s marketing of deposit accounts for bitcoin purchases, which the business represented as FDIC-insured.
After stopping withdrawals days earlier, Singapore-based crypto lender Vauld filed for bankruptcy protection with a Singapore court on July 8. According to The Block, the corporation owes $402 million to its creditors.
Valar Ventures, Pantera Capital, and Coinbase Ventures are among the investors in Vauld.
Vauld stated in a blog post on July 11 that it is considering a possible sale to London-based crypto lender Nexo while also evaluating potential restructuring alternatives.
Faced with an increase in withdrawals and a hit from 3AC, crypto lender BlockFi announced an agreement with FTX on July 1 that provides BlockFi with a $400 million revolving credit facility and includes an option for FTX to purchase the firm for up to $240 million.
BlockFi was heavily struck by the crypto crisis and adopted several cost-saving measures in June, including reducing its employment by 20% and decreasing CEO remuneration. In a capital round last year, the business was valued at $3 billion.