A wallet owned by embattled hedge fund Three Arrows Capital has removed $33 million in staked ETH (stETH) from the Curve Liquidity Farming Pool.
According to Etherscan and Nansen, the embattled crypto hedge fund also has 200 Bitcoin (BTC), $4 million worth of Tether (USDT) and $4 million in wrapped Ether (wETH) from Convex, another DeFi platform, away.
Three Arrows Capital filed for bankruptcy in July after falling victim to the collapse of TerraUSD, an algorithmic stablecoin. Three Arrows had invested $200 million in a $1 billion sale of TerraUSD’s sister coin, Luna, funds that went into the Luna Foundation Guard, an asset reserve designed to shore up TerraUSD’s peg to the US dollar . When TerraUSD and Luna collapsed, the hedge fund’s holdings were wiped out soon after. Co-founder Kyle Davies said the company could handle the loss at the time.
Why now?
The motive behind Three Arrows’ withdrawal is unclear. StETH, issued by staking pools like Lido Finance in exchange for ETH, can only be redeemed for ETH between six and 12 months after the Ethereum network transitioned from proof-of-work to proof-of-stake. Unless one uses Curve, which has a liquidity pool for trading between stETH and ETH, which has become unbalanced with more stETH than ETH.
By removing funds from Curve, 3AC could prepare to borrow ETH against the collateral of its stETH in order to qualify for the airdrop of a new token from a fork of the Ethereum blockchain. Otherwise, it would have to wait until the stETH can be redeemed for ETH after the Ethereum merger.
It previously dumped stETH into Curve along with Alameda Research after the token traded at a discount to the primary crypto on the Ethereum network, Ether.
Unpacking his wrapped ETH would change the ETH balance in his wallet, which would entitle the company to a corresponding airdrop of the new fork token.
But it could also liquidate its wETH, Bitcoin and USDT as part of its liquidation proceedings ordered by a British Virgin Islands court. In August, a court in Singapore granted Teneo, 3AC’s liquidators, permission to access the company’s financial records to reveal the location and availability of any remaining funds. These crypto assets, previously used to provide liquidity, could be part of the hedge fund’s remaining assets.
3AC faces tough claims from creditors
Three Arrows had $3 billion in assets under management as of April this year but is facing creditor claims from big names in the cryptocurrency industry, including Genesis Global Trading, which recently faced a $2.4 billion claim the company submitted. Three Arrows had also borrowed $687 million from bankrupt crypto broker Voyager, which has also filed for bankruptcy.
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