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Three Arrows Capital, a crypto hedge fund, filed for Chapter 15 bankruptcy in the Southern District of New York late Friday after weeks of speculation that it was functionally insolvent.
Chapter 15 filings are generally tied to foreign proceedings. A court in the British Virgin Islands previously ordered Three Arrows' local branch to enter into liquidation, indicating that Friday's filing is likely tied to this. U.S.-based firm Teneo Restructuring has been tapped to oversee the liquidations.
The firm borrowed large amounts of funds from several crypto lenders, including BlockFi, Celsius, Babel Finance and Voyager Digital, but was unable to pay. The lenders halted withdrawals or needed credit lines extended to weather the storm. Chapter11dockets.com first announced the bankruptcy, and Bloomberg reported it was a Chapter 15 filing.
According to Bloomberg, the Chapter 15 filing will let the firm protect its U.S. assets even as its BVI assets are liquidated.
"The Debtor’s business has collapsed in the wake of extreme fluctuations in cryptocurrency markets," the filing said, noting Three Arrows' intent "to stay active efforts by individual creditors to seize assets and to preserve the status quo."
The filing added: "The Debtor’s financial distress and the BVI Proceeding have been widely reported and the result of the proceeding has implications on the global digital asset markets."
Three Arrows Capital could not immediately be reached for contact.
UPDATE (July 1, 2022, 23:38 UTC): Adds quotes from the filing.