Cryptocurrency exchange Blockchain.com has lost $270 million by lending money to Three Arrows Capital, the leveraged hedge fund that is currently the subject of a liquidation order in the British Virgin Islands.
Three Arrows Capital, which managed billions of dollars worth of assets earlier this year, crashed due to a combination of falling cryptocurrency prices and inadequate risk management, leaving many crypto lending businesses exposed.
“Three Arrows is rapidly going bankrupt and the default effect is approximately $270 million worth of cryptocurrencies and US dollar loans from Blockchain.com,” Blockchain.com CEO Peter Smith wrote in a letter to shareholders.
Customers will note
In the four years that Three Arrows has been a counterpart to Blockchain.com, Smith said the company has borrowed and repaid over $700 million in cryptocurrency. In the June 24 letter, Smith also pointed out that Blockchain.com “remains liquid, solvent and our customers will not be affected.”
According to Coindesk’s Ian Ellison, the letter indicates that 3AC borrowed $700 million from Blockchain.com over the course of four years and paid it back. Additionally, Allison communicated with a source who was familiar with the finances of the business, and the source agreed that Blockchain.com’s finances were solid.
The liquidation of Three Arrows, known as 3AC, was reportedly sought about a week ago by creditors including Blockchain.com and derivatives exchange Deribit.
One of the oldest firms in the cryptocurrency sector, Blockchain.com was founded in 2011. It created one of the first web wallet and blockchain explorer. The Luxembourg-based firm this year became the first cryptocurrency-related sponsor of the American National Football League’s Dallas Cowboys.
The revelation comes after Blockchain.com signed a sponsorship deal with the Dallas Cowboys and secured up to $100 million in liquidity through Truefi’s single-borrower pool. In December 2021, Blockchain.com also bought the Latin America-based Sesocio cryptocurrency investment platform.
