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Three Arrows Capital, which has been facing accusations of using client funds to meet margin calls, is exploring asset sales or a bailout, The Wall Street Journal reported June 17.

The hedge fund has hired legal and financial advisers to find a solution for its investors and lenders, co-founder Kyle Davies told the WSJ. The decision comes after the company suffered substantial losses when the crypto market began to decline further on June 10.

Davies told the WSJ:

“We have always been believers in cryptocurrencies and we still are.

We are committed to working things out and finding an equitable solution for all of our constituents.”

In April, Three Arrows Capital had about $3 billion in assets under management. Then TerraUSD (UST) crashed, dealing a heavy blow to the hedge fund.

Three Arrows is trying to reach an agreement with its creditors to buy more time to come up with a plan. The fund continues to operate as it explores possible solutions, the WSJ reported.

Three Arrows was among a group of investors who participated in the $1 billion token sale by Luna Foundation Guard, the nonprofit organization behind the Terra ecosystem, earlier this year. The hedge fund invested about $200 million in Luna as part of the deal. The funds formed the reserve that was supposed to help UST maintain its peg to the US dollar. When UST collapsed, despite the injection of all its reserves, Three Arrows’ investment evaporated in a matter of days.

Davies told the WSJ:

“The Terra-Luna situation caught us off guard.”

Although Three Arrows managed to stabilize itself in the face of Luna’s losses, the rapid decline in the crypto market since last week has compounded the company’s problems, Davies told the WSJ. He added:

“We were not the first to be hit… This has all been part of the same contagion that has affected many other companies.”

Davies was referring to the problems at Celsius, which halted withdrawals and transfers on June 13, citing “extreme market conditions.”

Three Arrows is in the process of measuring the full extent of its losses and valuing its liquid assets, which include investments in crypto startups, Davies told the WSJ.

The hedge fund had a large exposure to the Grayscale Bitcoin Trust, which is recovering from losses amid the market downturn. Additionally, Three Arrows also had large amounts of Ethereum (ETH) staked on the Lido protocol, which was also struggling with issues with selling Ethereum (stETH) staked at a discount to ETH instead of 1-to-1.

Three Arrows’ investors included institutions and wealthy clients, Nichol Yeo, a partner at law firm Solitaire, which advises the hedge fund, told the WSJ. Yeo added that the firm keeps the Monetary Authority of Singapore, the country’s financial regulator, up to date with developments.

Three Arrows was based in Singapore until last year and then changed its base to the British Virgin Islands.

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This post Three Arrows Capital is reportedly considering asset sales and bailout

was published first on https://cryptoslate.com/three-arrows-capital-reportedly-considering-asset-sales-bailout/

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