After Celsius, cryptocurrency fund and high-risk fund manager Three Arrows Capital is considering selling more of its assets as it faces the risk of appearing insolvent to its clients, following the sharp drop in the digital asset markets.
The company, also known as 3AC, has hired legal and financial advisers to look at various solutions to help it meet its obligations to its investors and lenders. Several options appear to be on the table, including asset sales and a rescue package from another company, its co-founder, Kyle Davies, told the Journal.
Meanwhile, 3AC is trying to buy more time as it negotiates a new deal with its existing creditors.
The huge blow from Terra
Davies, who said he still believes in the future of cryptocurrencies, revealed the extent of 3AC’s involvement in a $1 billion coin sale by the Luna Foundation Guard (LFG), a non-profit organization founded to defend the dollar link to the Terra ecosystem’s stablecoin dollar link, last February.
Davies said that 3AC bought about $200 million in LUNC (previously LUNA) coins during the sale, which involved other venture capital firms DeFiance Capital, Republic Capital, GSR and Tribe Capital, among others.
Earlier this week, according to a tip from Terra Community Forum, 3AC had purchased a total of 10.9 million locked LUNCs, worth nearly $560 million. That position is now worth less than $1,000.
Liquidations in other positions after the market drop
In addition to exposure to the Terra ecosystem collapse, 3AC suffered huge liquidations in many positions this week after the price of Bitcoin (BTC) and Ethereum (ETH) fell to their lowest levels since December 2020.
Three Arrows Capital failed to cover margin calls from a group of its lenders, including BlockFi. These firms liquidated at least some of 3AC’s positions.