Deribit asserts that Three Arrows failed to return $80 million

• Cryptocurrency exchange Deribit claims Three Arrows failed to repay $80 million.
•  Derivatives venue says hedge fund exploited loans to increase its cryptocurrency market wagers.
• Two prominent crypto financial services firms, BlockFi and Genesis, liquidated Three Arrows’ investments last month.
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This week, Three Arrows Capital was liquidated after cryptocurrency exchange Deribit claimed the crypto hedge fund had failed to repay $80 million, underlining the depth of the liquidity crisis at the famous digital asset investment firm.

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According to court filings in the British Virgin Islands, the investor reportedly refused to refund the cash after derivatives venue Deribit reversed Three Arrows’ positions to fulfil a margin call precipitated by last month’s digital asset market volatility.

The allegations highlight the extent to which Three Arrows exploited loans to increase its cryptocurrency market wagers. Two prominent crypto financial services firms, BlockFi and Genesis, liquidated part of Three Arrows’ investments last month after the company failed to pay margin calls after its bets went sour.

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According to the exchange, Three Arrows was one of the most active participants in the business and a shareholder in Deribit. The difficulties of the investment company have exacerbated the credit crisis in the digital asset market.

According to court records filed by Deribit, Three Arrows borrowed bitcoin and ether from the derivatives exchange in March 2020, when the pandemic was at its peak. Three Arrows violated Deribit’s loan requirement for a minimum account balance on June 11, 2022, when the value of cryptocurrencies plummeted.

According to court documents, Deribit began liquidating Three Arrows’ holdings two days later, and on June 15 it terminated the lending arrangement and requested repayment of the outstanding loans, interest, and negative asset value of the account.