Genesis Crypto Lender Lent Three Arrows Capital $2.36 billion
Genesis Asia Pacific Pte Ltd, a division of the crypto lender owned by Digital Currency Group, has lent $2.36 billion to the bankrupt hedge fund Three Arrows Capital (3AC). 3AC's loans had a margin requirement of more than 80%, and Genesis sold the collateral when 3AC could not keep it, later demanding repayment of the debt through arbitration in New York.
Earlier reports said that Genesis faced a potential nine-figure loss due to the 3AC position, but the exact amount of debt has not yet been reported.
The documents point to the outstanding balance of the $2.36 billion loan that 3AC owes Genesis. They also show that the debt is insufficiently secured and that Genesis tried to repay some of its loans by launching arbitration proceedings against 3AC through the American Arbitration Association (AAA) in New York last month.
However, Genesis appears to have suspended the arbitration process after consulting firm Teneo was appointed in late June to oversee the liquidation of 3AC. On July 1, 3AC filed for Chapter 15 bankruptcy in New York.
"The balance sheets of DCG and Genesis remain strong. Due to the fact that there are no assets left in Three Arrows Capital, Genesis continues to be well capitalized, and its operations are going as usual," a DCG representative said.
Details of 3AC's loans were disclosed in a 1,157-page legal document uploaded online on Monday by Teneo, the firm appointed last month to oversee 3AC's liquidation. The document, which has become public, sets out the requirements for 3AC, which filed for Chapter 15 bankruptcy in New York a few days after a court in the British Virgin Islands appointed Teneo as a liquidator.
In its letter to AAA dated June 15, Genesis stated that 3AC violated two loan agreements signed in January 2019 and January 2020.
Genesis CEOMichael Moreau stated in a series of tweets on July 6 that the company's loans to 3AC have a weighted average margin requirement of over 80%, which 3AC failed to meet, prompting Genesis to sell the collateral. He also said that the Digital Currency Group has made certain commitments to Genesis to ensure that capital is available to "manage and scale" its business in the future.
Because of this, it is now Digital Currency Group, not Genesis, that is bearing the potential losses associated with borrowing 3AC, according to one person familiar with the matter.
The published documents relate to Genesis' requirement that $1.1 billion worth of "outstanding unsecured loans" be placed in escrow for the duration of the arbitration proceedings. This requirement now belongs to the Digital Currency Group, not Genesis.
According to the documents, as of June 15, 3AC lacked about $462 million to meet the requirements.
The documents also contain information about the pledge placed by 3AC. Genesis loans were secured by three packages of Grayscale Bitcoin Trust (GBTC) shares totaling 17,443,644 shares; 446,928 shares of Grayscale Ethereum Trust; 2,739,043.83 AVAX, Avalanche's own blockchain token; and 13,583,265 NEAR, NEAR Protocol's own token.
A few months ago, 3AC was considered one of the leading investment companies in the crypto sector, supporting dozens of blockchain developers, DeFi startups and crypto infrastructure providers. But its fortunes have changed dramatically over the past few months, starting in mid-June when it was revealed that crypto lenders had liquidated hundreds of millions of dollars' worth of collateral loans for a hedge fund.
https://coin-signal.com/cryptonews/genesis-crypto-lender-lent-three-arrows-capital-2-36-billion/
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