More new data in the Three Arrows Capital case! Cryptocurrency lender Genesis had lent more than 2.36 billion to the now famous investment fund. This astronomical amount of debt had not been revealed earlier and worsens the situation of 3AC.
By way of background, Three Arrows Capital has been in financial difficulties for several months, to the extent that a court initially declared it in liquidation, before it finally filed for Chapter 15 bankruptcy in early July. As reported yesterday, 3AC has been trying to pay off its creditors since then. But the list is long. And today’s news adds considerably to it, given the amount claimed by Genesis.
Genesis has agreed to lend $2.36 billion to Three Arrows Capital
According to a media source, which has been able to consult the official documents of the Three Arrows Capital file, Genesis Asia Pacific Pte Limited, a subsidiary of the group, has lent it 2.36 billion dollars. In reality, there are several loans, all with a margin requirement of more than 80%. The documents show that the debt is collateralised.
The two Genesis loans were secured by three blocks of shares in the Grayscale Bitcoin Trust (GBTC), with a total of 17,443,644 shares, as well as 446,928 shares in the Grayscale Ethereum Trust, followed by 2,739,043.83 AVAX, the native token of the Avalanche blockchain, and finally 13,583,265, the native token of the NEAR protocol.
But then what happened?
One of the letters shows that Three Arrows Capital did not honour its commitments. Instead, it even violated two loan agreements signed in January 2019 and January of the following year. In addition, the investment fund is blamed for not meeting the 80% margin requirement, which caused Genesis to sell the collateral.
After that, Genesis initiated arbitration proceedings to recover part of its claim. The arbitration proceedings were brought before the American Arbitration Association (AAA) in New York. However, it was put on hold when the new liquidator of 3AC was appointed.
Genesis is not exposed to 3AC
Despite this huge debt, Genesis claims not to be a collateral victim of 3AC. It is true that many companies have been dragged down or simply put into difficulties because of the fund’s failure. However, Genesis cannot deny the fear it had when it saw 3AC’s bankruptcy. Internal company documents warned of potential losses (“in the nine figures”) due to its “exposure to 3AC”. This is confirmed by the spokesperson for Digital Currency Group (DCG).
“DCG and Genesis’ balance sheets remain strong. With no remaining exposure to Three Arrows Capital, Genesis continues to be well capitalised and its operations are business as usual.”
In fact, the risks were transferred to DCG when the company agreed, in accordance with previous agreements, to take over part of Genesis’ liabilities. In fact, it is now DCG that has recovered the risks and is exposed to the potential (and very likely) losses of the loans in question. Consequently, it is also DCG that recovers the procedure, including the arbitration procedure. On this last point, it appears that DCG has filed an application to have the USD 1.1 billion of the “unsecured” loan placed in escrow.
It is clear that the days are passing, but that Three Arrows Capital is sinking further.