Genesis Global Had $2.36 Billion in Loans With Now-Insolvent Three Arrows Capital (3AC)

  • Genesis used the American Arbitration Association to issue a margin call to Three Arrows Capital to seek collateral to cover the deficit

A 1,157-page court filing by Teneo showed that crypto prime brokerage firm, Genesis Global, loaned $2.36 billion to Three Arrows Capital. Bankruptcy trustee, Teneo, has been in charge of 3AC’s assets following the liquidation order on the crypto hedge fund by a British Virgin Islands (BVI) last month.

Three Arrows Capital Woes Trickle Down

According to the document, Genesis Asia Pacific Pte Ltd is one of the creditors requesting 3AC to pay its loans totaling $2.36 billion. Genesis is one of the subsidiaries of a lending firm, the Digital Currency Group. Coindesk is the media arm of the digital currency group.

An analysis of the loan shows that it is collateralized in various digital assets. These digital assets include 13.9 million NEAR tokens, 17.4 million shares of the GBTC (Grayscale Bitcoin Trust), 2.7 million AVAX tokens, and 446,928 shares of Grayscale Ethereum. However, Genesis has liquidated all of these assets.

Genesis used the American Arbitration Association to issue a margin call to 3AC to seek collateral to cover the deficit. Unfortunately, 3AC couldn’t provide the necessary collateral. Hence, Genesis issued a default notice demanding the full repayment of the loan balance. Last month, Genesis did not disclose how much it was exposed to 3AC.

Sources familiar with the matter only said the amount was in the hundreds of millions. The popular crypto hedge fund filed a chapter 15 bankruptcy on July 1, 2022, in the Southern District of New York. When news broke about Genesis’s exposure to 3AC, the company’s CEO, Michael Moro, said Genesis’ parent firm (the digital currency group) would offset some of the losses.

Teneo and 3AC’s Singapore Assets

Last week, the Singapore news outlet, the strait times, reported that Teneo is making moves to secure 3AC’s Singapore assets. The bankruptcy trustee hired WongPartnership LLP, a local law firm, to convince Singapore’s high court to recognize the BVI liquidation order on 3AC.

If the move is successful, Teneo will continue the liquidation process of the hedge fund in its native country. Furthermore, the action will enable Teneo to subpoena the hedge fund’s founders (Kyle Davies and Su Zhu).

There are various reports that no one knows the current whereabouts of 3AC’s co-founders. Also, once Teneo takes charge of 3AC’s assets in Singapore, it will be able to pay off some of 3AC’s loans to its creditors. If the law firm argues that 3AC collapsed because of its founders’ mismanagement and the court agrees, it will facilitate Teneo’s control over 3AC’s Singapore assets. There have been intense sell-offs in the stock and crypto markets following the US Fed’s successive rate increases.

Genesis global isn’t the only crypto firm affected by 3AC’s issues and the current crypto winter. Voyager Digital, Vauld, and the Celsius Network are other notable crypto firms struggling to cope following 3AC’s insolvency issues. Coinbase is one of the top crypto market players affected by the crypto winter. Last month, the exchange announced an 18 percent reduction in its workforce.

Rebecca Davidson Verified

Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”

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