Blockchain.com may not recover the $270 million loaned to 3AC
Blockchain.com, a cryptocurrency firm may lose millions of dollars as a result of the collapse of crypto hedge fund Three Arrows Capital.
According to a report by CoinDesk, 3AC’s liquidation may cost the crypto exchange more than $270 million in lost funds.
The news comes as a fresh blow to the blockchain and cryptocurrency industry, which is still reeling from the Mt. Gox scandal.
According to the report, Blockchain.com had loaned $150 million to 3AC in November last year. The loan was secured against three classes of assets: Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC).
The report says that the loan was for 12 months and was to be used for margin trading on cryptocurrency exchanges.
However, with 3AC now in liquidation, it is unlikely that Blockchain.com will recover the full amount of the loan.
Following a major epidemic, crypto firms go bankrupt
One of several crypto firms caught up in a massive epidemic sparked by clear financial irresponsibility is ThreeArrowsCapital. It seems that Terra’s collapse in May was just the beginning.
The Crypto contagion has claimed another scalp. This time, it’s cryptocurrency investment firm Three Arrows Capital (3AC).
3AC, founded in 2012 by Su Zhu and Kyle Bass, was one of the earliest and most successful crypto hedge funds. The firm managed over $1 billion at its peak and was a well-known investor in high-profile projects like MakerDAO and Basis.
However, 3AC ran into trouble after loaning $270 million to crypto exchange Blockchain.com in November 2019. The loan was made in Bitcoin (BTC) and Ethereum (ETH), with the intention of funding Blockchain.com’s expansion.
Despite these developments, the market is likely to see some of the full impacts of what occurred. At firms like Voyager Digital, Celsius Network, BlockFi, and Vauld before it fully recedes. Some more will have undoubtedly perished by the time the tide fully retreats.
According to a letter released by Blockchain.com on Friday. The firm has concerns that 3AC’s bankruptcy risks putting $270 million in the exchange’s financial position. According to the article, Blockchain.com CEO Peter Smith shares these sentiments.
In June, Smith in a Tweet opined on the “unprecedented washout” in cryptocurrency. Predicting that the sector would suffer more “high-risk investment” liquidation.
“It is quite clear that some of the froth has come out of the market. And we expect there to be more rational pricing as time goes on,” Smith said at the time.
These days, Crypto exchanges have been hit by what can be called a perfect storm of conditions. Low trading volumes, high running costs. And a loss of institutional interests have all come together to put immense pressure on many exchanges.
Blockchain.com is no different. The company has been forced to lay off a lot of staff and is now said to be looking for a buyer.
On Thursday, Galaxy Digital CEO Mike Novogratz suggests the circumstances in the crypto sector. Particularly those involving collapsed businesses could be subject to inquiry and prosecution.
“There will be an investigation, there will be a lot of lawsuits, and people will go to jail,” Novogratz said on CNBC. “This was a fraud from top to bottom.”
The news of Blockchain.com’s possible troubles comes as the crypto industry is reeling from the collapse of another major player, QuadrigaCX.
This is not the first time that Blockchain.com has been embroiled in controversy. In January, the company was forced to refund $30 million to users after it was revealed that its Wallet service had been hacked.
While the hack was not specifically targeted at Blockchain.com. It highlights the risks associated with lending money to cryptocurrency firms.