Wrecked Crypto Hedge Fund Giant Defaults on $670 Million Loan

Voyager Digital plans to pursue recovery through the legal system after Three Arrows Capital failed to repay two loans by the required deadline.

The high-profile crypto hedge fund Three Arrows Capital has failed to repay two loans worth a total of $670 million from the crypto trading platform Voyager Digital by the required deadline.

As a result, Voyager issued a notice of default on Monday and said it plans to pursue recovery of the funds through the legal system.

Voyager had made two loans to Three Arrows Capital, or 3AC, of 15,250 Bitcoins and $350 million worth of USDC, a digital stablecoin backed by U.S. dollars.


Once a darling of the crypto industry, 3AC has collapsed amid broader tumult in the crypto industry after a series of highly leveraged bets went bad. The firm, started by childhood friends Zhu Su and Kyle Davies, had borrowed aggressively as it made large investments in the play-to-earn game Axie Infinity, the Solana blockchain, the crypto bank Celsius, and the cryptocurrency Luna, all of which have since crashed.

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As the situation deteriorated, 3AC became unable to pony up the necessary money to cover losses—these are called margin calls—and people who loaned the company money said Zhu and Davies became unresponsive.

“Losing a bet is one thing, but at least be honorable and not drag others into your bets who have nothing to do with it. Certainly don’t ghost on everyone since potentially, they could’ve helped you,” the head of trading at a firm that does business with 3AC said on Twitter.


The collapse of 3AC has had ripple effects throughout the crypto industry. The crypto lender BlockFi was forced to secure a $250 million revolving credit facility from the crypto exchange FTX as a result of financial troubles it faced because of its loans to 3AC. FTX is also in talks to acquire a stake in BlockFi.

Ahead of 3AC’s collapse, Voyager was already struggling through the latest “crypto winter” as its share price plummeted (it is now down 95 percent on the year). But the exposure to 3AC’s own troubles proved particularly difficult for Voyager to navigate. To continue to fulfill its own customer withdrawal requests, Voyager earlier this month had to secure a $500 million line of credit from the crypto trading group Alameda Ventures, which was originally founded by FTX CEO Sam Bankman-Fried. 

"We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands," Voyager CEO Stephen Ehrlich said in a statement Monday.

Voyager had announced last week that it planned to issue a notice of default if 3AC did not repay the loan by Monday after initially requesting $25 million worth of USDC by Friday.

3AC’s founders have told The Wall Street Journal that they are searching for firms that would be willing to rescue them and potential lines of credit as they sell assets.