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Highlights
- Genesis' parent company Digital Currency Group Inc. on 18 July filed a whopping US$1.2 billion claim against the now defunct Three Arrows Capital (3AC).
- According to the court filing, 3AC owes Genesis Asia Pacific, a subsidiary of Genesis Global, approximately US$1.14 billion and pledged AVAX and NEAR tokens worth US$91.3 million.
Genesis' parent company Digital Currency Group Inc. (DCG) filed a whopping US$1.2 billion claim on 18 July against the now defunct Three Arrows Capital (3AC). According to the 1,157-page court filing by Genesis, 3AC owes Genesis Asia Pacific, a subsidiary of Genesis Global, approximately US$1.14 billion, and pledged AVAX and NEAR tokens worth US$91.3 million.
It is believed that 3AC, which recently filed for Chapter 11 bankruptcy filing, had taken a loan of US$ 2.36 billion from Genesis. The loans are dubbed to have a margin requirement of over 80%, and it sold collateral when 3AC failed to meet that.
Earlier this month, Genesis CEO Michael Moro confirmed 3AC exposure, hinting that the firm has managed to buck the loss despite 3AC failing to meet the margin call on capital borrowed.
When 3AC brought the market down
Three Arrows capital's recent liquidation had brought the entire crypto market down, dropping well below the US$1 trillion mark. And even though the market managed to reclaim the US$1 trillion on 18 July, 3AC has profoundly impacted the market.
In fact, Three Arrows worked on the principle of borrowing money from across the industry before it started to invest that capital in other projects. This formula was a hit for 3AC, following which it raised about US$10 billion in assets, thus making it one of the pioneer crypto hedge funds in the world.
In May and June this year, with the Terra collapse, 3AC witnessed a complete change of fortunes, bringing down the likes of Voyager Digital etc. Crypto lenders Genesis and BlockFi, crypto derivatives platform BitMEX and crypto exchange FTX couldn't escape from 3AC's sudden change of fortunes.
What the future holds?
In a series of tweets by Genesis CEO Moro, he highlighted that the firm's primary objective would be to ensure that Genesis Trading works optimally to isolate the risk further.
DCG has taken up the liabilities of Genesis and ensured that it has enough capital to scale and operate the business for the long term. Though this seems to be an effort to please the investors, Genesis must first win back their confidence in a bid to survive in the market. The future course of action may depend on whether it can recover its losses and pay back its investors.
The recent 3AC collapse and the Terra fiasco are two latest examples to show that the crypto market is highly volatile, and the fortunes can flip at any given time. Therefore, one must tread carefully in the space.
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