Three Arrows hedge fund has defaulted on $675m crypto loan, broker Voyager Digital says

Crypto broker Voyager Digital said that hedge fund Three Arrows Capital had defaulted, failing to make loan payments tied to large bets in the digital-currency realm.

Three Arrows had borrowed $675m from Voyager Digital in the form of 15,250 bitcoin and $350m in USD Coin, a stablecoin whose value is pegged to the dollar. Voyager had previously said it would issue a notice of default if the crypto hedge fund didn’t repay the loan by 27 June.

Three Arrows Capital hired legal and financial advisers after suffering heavy losses from a broad market selloff in digital assets. Its troubles and those of other crypto firms have reverberated widely through the digital-assets ecosystem, revealing the interconnectedness of its largest players.

The firm had invested in Luna, a cryptocurrency that has eroded nearly all of its value, and “Lido Staked ether” tokens, a derivative of ether that has also suffered losses. The hedge fund is exploring options including asset sales and a rescue by another firm, The Wall Street Journal previously reported.

READ Why the crypto winter could be a Lehman moment

A lawyer for Three Arrows didn’t immediately respond to a request for comment.

Voyager Digital said it intends to recover its assets and is discussing legal remedies with its advisers. The crypto broker said it had $137m of cash and crypto assets on hand as of 24 June and is still processing user orders and withdrawals, adding that it has engaged Moelis & Company as financial advisers.

A Moelis spokesperson declined to comment.

Voyager Digital said 27 June it had used $75m from a line of credit it took out last week to facilitate customer orders and withdrawals and may use more. The crypto broker said last week it secured a loan that includes $200m in cash and USD Coin and 15,000 bitcoin from crypto-trading firm Alameda Research to meet customer liquidity needs.

The two lines of credit expire at the end of 2024 and carry an annual interest rate of 5% payable on maturity.

Other crypto firms have been hurt by sharp falls in crypto’s value. Celsius has hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, The Wall Street Journal reported. The major crypto lending platform has suspended withdrawals for the past two weeks.

Crypto exchange FTX is also in talks to acquire a stake in crypto lender BlockFi, The Journal has reported.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

This article was published by Dow Jones Newswires, a fellow Dow Jones service

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