Crypto Fund Three Arrows Capital Facing Potential Insolvency: Report

After liquidations worth $400 million, Three Arrows Capital is reportedly working on an arrangement with lenders and other parties

article-image

Source: Shutterstock

share

key takeaways

  • Cofounder Zhu Su confirmed Three Arrows Capital is struggling, but didn’t address insolvency rumors
  • The firm drew attention on social media after blockchain data showed it selling its stETH positions

Recent on-chain data has triggered speculation that crypto trading and venture capital firm Three Arrows Capital (3AC) may be the latest prominent industry name to crumble.

Those indications were further fueled by a tweet on Tuesday from 3AC’s cofounder Zhu Su, who seemed to confirm a period of stress but didn’t drop specific details.

After what appears to be a $400-million liquidation by top-tier lenders, 3AC may now be facing insolvency, The Block reported on June 15, citing sources familiar. Since its liquidation, 3AC is said to have maintained limited contact with counterparties.

Loading Tweet..

The firm, which counts BlockFi and Deribit among its investments, is exploring how it can reclaim its position with lenders and other parties, the report added.

3AC didn’t immediately respond to a request for comment by Blockworks.

In traditional finance, liquidations happen when companies attempt to cover debts by selling some assets at a loss. In decentralized finance, a fund or protocol would sell crypto assets to cover its debt.

Founded in 2012 by classmates Zhu Su and Kyle Davies, 3AC is a well-known crypto hedge fund that has invested in multiple GameFi and DeFi projects. At market peak, it reportedly managed about $10 billion. In April, the fund pledged to move its headquarters from Singapore to Dubai. 

Three Arrows Capital takes haircut to pay back Aave loans

Due to its substantial investment in Terra, 3AC had already faced a major setback with the stablecoin’s collapse. 3AC also drew attention on social media after it began dumping its staked ether (stETH), which is down nearly 40% in the last week alone. 

The stETH token is meant to be redeemable for one ETH after Ethereum completes its transition to proof of stake. Due to current market volatility, stETH has fallen up to 7% below par with ETH, causing issues for some of its largest holders such as 3AC, as well as embattled crypto lender Celsius.

Notably, 3AC began withdrawing stETH from decentralized platforms in May during TerraUSD’s crash. More recently, the firm on Tuesday withdrew more than 81,000 stETH from interest-bearing DeFi protocol Aave — worth around $92 million at the time. 

Loading Tweet..

Shortly after, 3AC traded 38,900 stETH for 36,718 ETH (then worth $43.9 million) via decentralized exchange 0x, representing a 6% haircut on what should’ve been close to a one-to-one trade. 3AC then returned the ETH to Aave, as it was on loan.

In May, crypto bull Zhu said on Twitter that his supercycle price thesis was “regrettably wrong.” That thesis was laid out in an interview from February, when he suggested bitcoin could hit $2.5 million if it manages to capture a significant chunk of gold’s market share.

Along with stocks and other asset classes, the total market value of cryptocurrencies has fallen to $863 billion, according to Blockworks Research, down from $3 trillion in November.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

REPORT_Template.png

Research

The Sonic blockchain is leveraging redesigned airdrop incentives and its FeeM program to propel DeFi activity and attract institutional capital, setting the stage for ecosystem growth. Within this environment, leading protocols Shadow Exchange and Silo are poised to asymmetrically benefit due to innovative features and favorable valuations, despite facing ecosystem dependency and competitive pressures. This positions them as compelling, potentially shorter-term, investment opportunities contingent on Sonic's sustained success.

article-image

Sponsored

WalletConnect is the default for secure, scalable onchain interaction — but this isn’t a peak, it’s the launchpad

article-image

Circle’s stock is expected to price at $31 and will go public on the NYSE Thursday

article-image

Solana’s most prolific token-launch tool might be prepping a token of its own

article-image

The tentative agreement China and the US penned last month appears to be in a precarious position

article-image

Fineqia’s Matteo Greco says Circle’s targeting a valuation in line with market expectations to avoid a post-launch drop like Coinbase

article-image

The President’s son reportedly said his family may pursue legal action