Factbox – The crypto crash hit these companies the hardest. Cryptocurrencies have been hit hard by concerns that rising interest rates will end the era of cheap money, with the world’s largest digital asset, Bitcoin, down more than 56% from this year’s peak. Several crypto companies have filed for bankruptcy or been forced to file for emergency capital infusions.
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Singapore-based crypto hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy on July 1.
Once a formidable player in the digital asset space, 3AC’s demise appears to stem from the company’s bet on the Terra ecosystem, which was behind the failed stablecoin TerraUSD. The token lost almost all of its value in May, erasing nearly half a trillion dollars from the crypto market.
3AC was very influential and could not meet the margin demands of its lending partners. As a result, crypto lenders BlockFi and Genesis Trading liquidated their positions in the company. According to court documents, 3AC’s creditors say they owe more than $2.8 billion.
New Jersey-based crypto lender Celsius suspended withdrawals on June 12 and filed for Chapter 11 bankruptcy a month later, citing a $1.19 billion deficit on its balance sheet. It was worth $3.25 billion in a funding round in October.
Celsius has faced complex investments in the wholesale digital asset market. The company has attracted retail investors by promising annual returns of up to 18.6% but is struggling to make buybacks as crypto prices plummet.
In his first bankruptcy hearing, Celsius’s lawyer said his bitcoin mining activity could provide the company with a way to pay back customers.
Meanwhile, several state regulators are investigating Celsius’ decision to halt customer recalls, Reuters reports.
Crypto lender Voyager Digital, also based in New Jersey, is a rising crypto star, hitting a market cap of $3.74 billion last year. But the collapse of 3AC dealt a major blow to Voyager, which was heavily invested in hedge funds. Voyager has filed more than $650 million in claims against 3AC.
Voyager filed for Chapter 11 bankruptcy on July 6 and reports that it has $110 million in cash and crypto assets. Meanwhile, the U.S. Federal Deposit Insurance Corporation. have confirmed that they are investigating the marketing of Voyager deposit accounts for the purchase of cryptocurrencies, which the company advertises as FDIC insured.
Crypto exchange FTX and Alameda Research, both founded by billionaire Sam Bankman-Fried, have offered to buy all digital assets and Voyager loans except for loans to 3AC and allow Voyager customers to withdraw their assets from FTX withdrawal accounts. However, Voyager rejected this offer in a legal battle as a “low offer”.
Singapore-based crypto lender Vauld filed a lawsuit in a Singapore court on July 8 seeking protection against its lenders after suspending payments days earlier. The company owes its creditors $402 million, according to a report by The Block.
Vauld is backed by Valar Ventures, Pantera Capital and Coinbase Ventures from billionaire investor Peter Thiel.
In a July 11 blog post, Vauld said he was discussing a potential sale of London-based crypto lender Nexo while exploring possible restructuring options.
Faced with a surge in withdrawals and a hit by 3AC, crypto lender BlockFi signed a deal with FTX on July 1, providing BlockFi with a $400 million revolving credit facility and including an option to allow FTX the company to buy up to $240 million.
Hardly hit by the cryptocurrency crash, BlockFi implemented several cost-cutting measures in June, including a 20% staff cut and executive pay cuts. The company was valued at $3 billion in a funding round last year.