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

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Crypto brokerVoyager Digitalsaid 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 didnt repay the loan by 27 June.

Three Arrows Capitalhired 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 haseroded 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.

READWhy the crypto winter could be a Lehman moment

A lawyer for Three Arrows did not 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 cryptos value. Celsius hashired 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 [email protected]

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

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