Deribit is part of creditors that made 3AC liquidation calls

A submission to the Clearing Court of Three Arrows Capital (3AC) indicates that Deribit was one of the creditors who promoted the crypto hedging that motivated the clearing, the Financial Times. report July 1.

Three Arrows Capital suffered significant losses in the recent market downturn, causing a call for bankruptcy. These large losses affected the ability to pay funds to meet margin calls, after which Derivit promoted liquidation.

According to documents filed in court in the British Virgin Islands, Derivit argues that “the company may not be able to pay or pay its debt because it has expired and therefore went bankrupt.” did.

Origin of credit

A court document revealed that the credit relationship between Deribit and 3AC began in March 2020 after a crypto hedge fund borrowed Bitcoin and ether from Deribit.

However, things began to worsen on June 11, 2022, when the crypto market experienced a major sell-out and prices fell. Due to the extreme volatility of the market, 3AC violated Deribit’s loan policy and minimized the balance of the account.

On June 13, the Derivatives Exchange began liquidating 3AC positions and ended the agreement three days later. Deribit then requested payment of unpaid loans, interest, and negative asset values for the account.

According to court documents, Deribit demanded a total of $ 801.13 million. It consisted primarily of 1,300 Bitcoin and 15,000 ether loans, with a negative asset value of approximately $ 42 million and a negative asset value of $ 37.1 million.

Blockchain.com has also confirmed that it is one of the creditors who requested the liquidation of 3AC. In a statement to Bloomberg News, a spokesperson for the company said:

“We believe that Three Arrows Capital has scammed the crypto industry and will hold them accountable to the fullest extent of the law. We have applied for immediate liquidation of all Three Arrows global assets. “

Prior to the clearing push of Deribit and Blockchain.com, crypto hedge funds saw their positions in BlockFi and Genesis cleared after they were unable to respond to margin claims.

3AC ordered liquidation

A court on a British island on June 27 ordered 3AC to liquidate to repay creditors. The order was placed after crypto broker Voyager Digital announced that 3AC had defaulted on a $ 670 million loan.

The court then appointed two senior members of the U.S.-based advisory firm Teneo to oversee the liquidation, according to sources familiar with the matter, The Washington Post. report..

It is unclear what the impact will be on 3AC creditors.

Given the key position of 3AC in the credit market, concerns about the wider market have emerged, further intensifying the credit crisis in the digital market. To exacerbate the problem, crypto hedge funds are currently facing regulatory concerns.

On June 30, Singapore’s financial regulators knocked on the 3AC door after claiming to have provided false information about its business in Singapore.