Three Arrows Capital, the troubled $10B crypto hedge fund, has defaulted on a nearly $700M loan from Canadian crypto exchange Voyager Digital, the latter announced Monday.
In an extraordinary statement last week, Voyager said Three Arrows owed it 15,250 Bitcoins and $350M in the USDC stablecoin and gave the hedge fund until June 27 to repay the loan. Bitcoin was trading at $20,783 midday New York time Monday.
Voyager issued a notice of default Monday, and said it intends to pursue recovery and is discussing its options with lawyers. Three Arrows did not immediately respond to a request for comment Monday.
The decision is bound to further rock the lending sector in crypto. The fall of Terra in May and suspension of withdrawals at crypto bank Celsius this month has shattered confidence in the burgeoning business of making cryptocurrency-denominated loans, especially ones that are not secured by collateral.
Another Three Arrows partner is also threatening the embattled hedge fund with legal action. Last week, Kyber Network said about $8M of its treasury had been entrusted to Three Arrows but it had failed to respond to acknowledge repeated requests for information.
As of June 24, Voyager had $137M in cash and crypto assets on hand, it said.
“We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands,” Stephen Ehrlich, Voyager’s CEO, said in a prepared statement.
Line of Credit
The exchange’s financial woes have led it to the arms of trading firm Alameda Capital, which recently gave Voyager a line of credit worth almost $500M. Voyager has since borrowed $75M, it said Monday.
“The platform continues to operate and fulfill customer orders and withdrawals,” Voyager said in a news release, “and may continue to make use of the Alameda facilities to facilitate customer orders and withdrawals, as needed.”