Cryptocurrency exchange Blockchain.com could potentially lose $270 million from its loan exposure to the hedge fund Three Arrows Capital, which filed for Chapter 15 bankruptcy last week.
“Three Arrows is rapidly becoming insolvent and the default impact is approximately $270 million worth of cryptocurrency and U.S. dollar loans from Blockchain.com”
wrote the company’s CEO Peter Smith in a shareholders letter, as reported by CoinDesk.
Three Arrows Capital – also called 3AC – was one of the biggest hedge funds in the industry, with billions worth of crypto under management. However, the firm exploded due to a combination of the ongoing market crash and poor risk management.
Over the course of four years, Blockchain.com had dispatched loans worth approximately $700 million to 3AC, which the firm managed to pay back.
Smith pointed out in the letter that even after the hit, the company “remains liquid, solvent, and our customers will not be impacted.“
Deribit, another cryptocurrency exchange, also took a hit because of its significant loan exposures to 3AC. It is believed that both the exchanges together pushed for 3AC’s liquidation after the hedge fund failed to act upon its margin calls.
“We believe Three Arrows Capital defrauded the crypto industry and intend to hold them accountable to the fullest extent of the law”
a spokesperson from Blockchain.com had said, according to a Bloomberg report.
Established in 2011, Blockchain.com is among the leading crypto exchanges and one of the earliest crypto wallet developers.
The Luxembourg-based company recently secured $100 million in liquidity from Truefi’s single-borrower pool and signed up a sponsorship deal with Dallas Cowboys.