Factbox-The Crypto Crash That Hits These Companies Hardest
Cryptocurrencies have been hit hard by fears a rate hike will end the era of cheap money, with the world’s largest digital asset, bitcoin, down more than 56% from this year’s high. Several crypto companies have filed for bankruptcy or were forced to seek emergency funding.
Three capital arrows
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 seems to stem from the company’s bet on the Terra ecosystem, behind the failed stablecoin terraUSD. That token lost almost all of its value in May, removing nearly half a trillion dollars from the crypto market.
With high leverage, 3AC was unable to meet margin calls from the counterparties it borrowed. As a result, crypto lenders BlockFi and Genesis Trading liquidated their positions with the company. According to court filings, 3AC’s creditors claim they owe more than $2.8 billion.
Network Celsius
New Jersey, C-based crypto lender C suspended withdrawals on June 12 and a month later filed for Chapter 11 bankruptcy, listing a $1.19 billion shortfall on its balance sheet. It was valued at $3.25 billion in a funding round in October.
Celsius has encountered complicated investments in the wholesale digital asset market. The company has attracted retail investors by promising annual returns as high as 18.6%, but has struggled to meet buybacks as cryptocurrency prices have dropped.
During the first bankruptcy hearing, Celsius’ lawyers said that their bitcoin mining operation could provide a way for the company to repay customers.
Meanwhile, several state regulators are investigating Celsius’ decision to suspend customer withdrawals, Reuters reported.
Cruise ship
Cryptocurrency lender Voyager Digital, also based in New Jersey, is already a rising crypto star, reaching a market cap of $3.74 billion last year. But the collapse of 3AC dealt a major blow to Voyager, which has been hit hard by hedge funds. Voyager has filed a claim of more than $650 million against 3AC.
Voyager filed for Chapter 11 bankruptcy on July 6, reporting that it has $110 million in cash and crypto assets. Since then, the US Federal Deposit Insurance Corporation has confirmed that it is probing the marketing of Voyager’s deposit accounts to purchase cryptocurrency, which the company has advertised as FDIC-insured.
Cryptocurrency exchange FTX and Alameda Research, both founded by billionaire Sam Bankman-Fried, have offered to purchase all of Voyager’s loans and digital assets, excluding its loans to 3AC and allows Voyager customers to withdraw their assets from their FTX accounts. However, Voyager dismissed that offer in a court filing as a “low bid”.
Vauld
Singapore-based crypto lender Vauld on July 8 applied to a Singapore court for protection against its creditors, after suspending withdrawals a few days earlier. The company owes $402 million to its creditors, according to a report from The Block.
Vauld is backed by billionaire investor Peter Thiel’s Valar Ventures, Pantera Capital and Coinbase Ventures.
In a July 11 blog post, Vauld said it is discussing a possible sale to London-based crypto lender Nexo, while also exploring potential restructuring options. .
BlockFi
Facing an increase in withdrawals and effects from 3AC, crypto lender BlockFi signed an agreement on July 1 with FTX, providing BlockFi with $400 million in revolving credit and includes an option that would allow FTX to acquire the company for up to $240 million.
BlockFi has been hit hard by the crypto crash and implemented multiple cost-cutting measures in June, including cutting headcount by 20% and cutting executive compensation. The company was valued at $3 billion in a funding round last year.
