The crypto bloodbath already claimed Terra Luna and Celsius—now it may claim its third high-profile victim within weeks.
Hedge fund Three Arrows Capital, or 3AC for short, could end up being the latest scalp as rumors swirled over its impending demise owing to losses connected to the deep slump in Bitcoin, Ether, and other altcoins.
Cofounder Su Zhu took to Twitter to at least acknowledge the concerns—spread among others by a research analyst at The Block—although the cryptic answer he provided shed little light on the extent.
“We are in the process of communicating with relevant parties and fully committed to working this out,” Zhu posted to Twitter.
Fortune reached out to the fund with additional questions, but did not receive a response as of print time.
Danny Yuan of Hong Kong–based cryptocurrency trading firm 8 Blocks Capital claimed to be affected by the company’s problems.
“We trade in one of 3AC’s trading accounts. This morning they took about [1 million] out of our accounts,” he posted. “I hope you pay us back asap.”
The speculation comes just 48 hours after crypto lender Celsius froze all withdrawals amid a run on its deposits.
With no central bank to step in and provide liquidity as a lender of last resort—anathema to crypto fans who prize decentralization—fears over a potential collapse further sapped confidence in digital assets at the start of this week.
Only last month they were tested to their limit after the first tier one cryptocurrency Luna went to zero in a death spiral that wiped tens of billions of dollars invested in TerraUSD algo stablecoin and its sibling Luna ecosystem.
On Wednesday, Bitcoin and Ether came very close to touching the $20,000 and $1,000 level marks during the course of the session, prompting fears of margin calls for the world’s single biggest Bitcoin holder, MicroStrategy.
Given the panic that has engulfed the crypto market, it comes as little surprise that other major players started to distance themselves from 3AC.
The company behind collateralized stablecoin Tether (USDT) claimed a collapse of the hedge fund would not pose a danger to its operations.
“Tether is aware of other rumors being spread, suggesting that it has lending exposure to Three Arrows Capital,” it wrote. “This is categorically false.”
Unironically in the very same statement it condemned speculation its commercial paper holdings suffered a 30% loss in value as chatter “likely spread to induce further panic.”
Assurances from crypto players however can have a very short shelf life. Just one day before Celsius froze all withdrawals, CEO Alex Mashinsky dismissed the notion it was struggling to meet them as “misinformation.”
According to the 3AC website, the firm was founded by Zhu and Kyle Davies in 2012.
It has invested in a number of projects across the broader industry, including crypto exchanges such as Deribit, decentralized apps, and Sky Mavis’s play-to-earn NFT video game, Axie Infinity.
Drawn to crypto as a libertarian, Zhu was known for his ultra-bullish stance, predicting a “supercycle” that would see Bitcoin eventually displace gold as the hardest reserve asset.
Late last month, however, he admitted at least a temporary defeat.
“[The] supercycle price thesis was regrettably wrong, but crypto will still thrive and change the world every day,” he wrote at the time.
