Michael Moro, Genesis CEO, has confirmed that Genesis was exposed to the troubled hedge fund Three Arrows Capital. All hedge funds should not have the same amount of leverage.
A recent tweet thread by Michael Moro, Genesis CEO, stated that the “large counterparty” failed to meet a margin-call. was mentioned last Month by the institutional crypto broker. It was the troubled Singapore-based fund Three Arrows Capital (3AC).
stated that in June, we had previously stated that we had mitigated our losses due to a large counterparty which failed to pay a margin call. We can confirm that Three Arrows Capital was the counterparty now that the BVI bankruptcy proceedings have commenced.
This news follows a court order in the British Virgin Islands to liquidate all assets. Moro can now identify the large counterparty because of its public nature.
He stated that the collateral used to secure the loan was “immediately sold”.
Margin calls are similar to defaulting on a loan. Investors who speculate with borrowed money will fall below the broker’s maintenance margin. Moro stated that 3AC had a maintenance margin of “weighted-average requirement of more than 80%,” which meant that 3AC would need to keep this amount before their collateral was sold.
Moro’s parent company, Digital Currency Group (DCG), also took some losses to “ensure that [Genesis] has the capital to continue operating” in the near future.
Decrypt contacted Genesis to find out the value of the loan in dollars and how DCG helped with the firm’s shortfall.
Three Arrows, Genesis, and the Crypto Contagion
3AC, which was founded by Su Zhu, Kyle Davies and Kyle Davies, has been liquidated before.
3AC emerged as a major counterparty to several other crypto firms in the aftermath of the fall of Terra’s UST stablecoin, and its sister governance token LUNA, in May. According to Davies, the Wall Street Journal reported that the fund had suffered losses of approximately $200 million.
After Bitcoin began to tumble, other trading platforms like BitMEX and FTX all announced they had liquidated 3AC’s positions following similar margin calls.
After each liquidation of 3AC, both BlockFi and Voyager crypto lending platforms suffered huge losses.
BlockFi has agreed to acquire terms with crypto-exchange FTX and Voyager filed yesterday for Chapter 11 bankruptcy