Blockchain.com reveals $270 million loss on exposure to Three Arrows

abdelaziz Fathi

Cryptocurrency wallet provider Blockchain.com said on Friday it had been exposed to Three Arrows Capital (3AC) after the recently bankrupt hedge fund failed to meet a margin call.

“Three Arrows is rapidly becoming insolvent and the default impact is approximately $270 million worth of cryptocurrency and U.S. dollar loans from Blockchain.com,” Blockchain.com’s Chief Executive Officer Peter Smith said in a letter to shareholders.

Blockchain.com is also pursuing all strategies to recover any potential loss, he added.

The apparent insolvency of the mega crypto hedge fund has shaken the cryptocurrency industry. Many well-known crypto brokers and lenders disclosed huge losses that forced some of them to file for bankruptcy.

Cryptocurrency lender and broker Genesis revealed earlier this week it had exposure to Three Arrows Capital. However, the company’s CEO said they sold collateral and hedged its downside once the crypto hedge fund failed to meet a margin call in June. He added that the firm’s loans to 3AC had a weighted average margin requirement of over 80%, but didn’t disclose the loaned amount.

TSX-listed crypto broker Voyager Digital also filed for bankruptcy, days after it issued 3AC a formal notice of default to recover roughly $660 million allegedly loaned to the Singapore-based hedge fund.

Voyager stated that it is working with lawyers to discuss available options, including pursuing legal action against 3AC should the venture fund – which suffered a major liquidity crisis – be unable to repay its debt.

Blockchain.com is looking at the IPO route

The news comes barely weeks after Blockchain.com said it is interviewing investment bankers about going public as soon as this year.

The company hasn’t made a final decision, though, and its plans for an initial public offering (IPO) could change, and the public debut could also slip to next year.

The news should come as no surprise as Macrina Kgil, chief financial officer of Blockchain.com, told Forbes last year that they are considering going public, but there were no immediate plans for action.

Blockchain.com, led by CEO and co-founder Peter Smith, is said to have registered 73 million crypto wallets and over 31 million verified users in more than 200 countries. It also claims a market share of 28% of all bitcoin transactions.

Earlier this year, Blockchain.com had raised an undisclosed amount in its Series D funding round at a whopping $14 billion valuation. The recent post-money valuation has more than doubled from the $5.2 billion valuation that Blockchain amassed at its Series C financing round of $300 million in March 2020. But, more interestingly, the previous valuation came just one month after the company raised $120 million in a funding round that valued it at $3 billion.

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