(Bloomberg) — Crypto lender Nexo says it has “zero” exposure to Three Arrows Capital LLC and at one point declined to provide a loan to the troubled hedge fund at the center of mounting speculation about its financial health.
“We have zero exposure to 3AC,” said Antoni Trenchev, Nexo co-founder, on Bloomberg Television Friday. “A few years ago they came to us and asked for an unsecured loan, which we did not feel comfortable providing because it goes against our risk-management parameters.”
Singapore-based Three Arrows, a large crypto investor and holder of digital tokens, stirred concern about troubles at the firm after a cryptic tweet from its co-founder Zhu Su on Tuesday. The executive tweeted that Three Arrows is committed to “working this out,” without providing further details. The firm didn’t immediately respond to a request for comment by Bloomberg.
The crypto industry has been rocked by suspected problems at major exchanges and hedge funds after recent troubles at crypto lender Celsius Network and the global plunge in digital-asset prices.
Industry players are now seeking to reassure clients on their liquidity and exposure to counterparties. Crypto exchange BitMEX gave a $6 million secured loan to Three Arrows, a person familiar with the matter told Bloomberg on Friday. The amount is relatively small compared with BitMEX’s financial position, the person said. Crypto lending platform BlockFi Inc., meanwhile, said it continues normal operations and no client funds are impacted, in an apparent move to allay concerns over contagion risks from Three Arrows.
BlockFi confirmed it recently had a large client that failed to meet its obligations on an overcollateralized margin loan, and it “fully accelerated the loan and fully liquidated or hedged all the associated collateral,” Chief Executive Officer Zac Prince said on Twitter, without naming the client. Earlier, the Financial Times reported that BlockFi was among companies that liquidated at least some of Three Arrows’ positions as the crypto hedge fund failed to meet margin calls.
Three Arrows has been liquidated by Deribit, according to The Block. (The parent company of the derivatives exchange also counts Three Arrows as a shareholder.) When contacted for comment by Bloomberg, a Deribit executive pointed to a statement that said the company has “a small number of accounts that have a net debt to us that we consider as potentially distressed”.
The statement added that operations wouldn’t be affected and that the exchange would remain financially healthy even if none of that debt were repaid.
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