Crypto hedge fund Three Arrows has been ordered into liquidation by a British Virgin Islands (BVI) court after it was hit hard by the $2trn crash in crypto assets.
The court has appointed two partners from advisory firm Teneo to handle the liquidation, according to an anonymous source speaking to Bloomberg.
The order was made on Monday in the BVI where the fund is incorporated. The BVI Commercial Court can order companies to be liquidated if they are judged as unable to pay their debts, and therefore regarded as insolvent.
Three Arrows invested in various decentralized finance platforms, including Aave and dYdX, as well as crypto infrastructure firms such as StarkWare.
It’s unclear how much of the firm’s holdings will be subject to a sale but the Teneo advisers are understood to be overseeing talks with potential buyers.
Three Arrows was founded by former Credit Suisse traders Zhu Su and Kyle Davies in 2012.
Three Arrows’ assets under management were estimated to be around $10bn in March, according to blockchain analytics firm Nansen.
In April, Zhu announced that the fund was planning to move its headquarters to Dubai from Singapore. However, within a couple of months the market had turned, and Zhu tweeted a hint that it may be in trouble.
Three Arrows’ liquidity crunch is just one of a series of crises that have been sparked by the massive downturn in the crypto sector this year.
TerraUSD stablecoin collapsed, while there were liquidity issues at lenders Celsius Network and Babel Finance.
Three Arrows’ lack of liquidity has had a knock-on effect elsewhere in the market too, with crypto broker Voyager Digital saying this week that it issued a notice of default to Three Arrows after failing to receive repayment on a loan worth around $675m.
Crypto lender BlockFi and exchange Genesis also said they had to liquidate a large unnamed counterparty recently.