What can we learn from Three Arrows Capital (3AC)? 👀 How did the whole situation happen & what could we possibly do differently? Let CMCAlexandria break it down for you 👇
A margin call is when your margin falls below the maintenance amount required to keep the leverage that you have taken, causing lenders to sell your assets.
Furthermore, many of their venture investments were not vesting until very late. This essentially meant that 3AC had no funds left to top up collateral in their loans.A court in the British Virgin Islands ordered 3AC to liquidate their assets after they failed to repay loans. The fund itself also filed a case for its ownA liquidation can occur voluntarily or by force, and in this case — you’ve probably guessed it — the forceful conversion of 3AC assets to be paid back to its creditors.
Both of these firms recently declared Chapter 11 bankruptcy, but the real tragedy is the scores of retail investors' funds — and life savings in some cases — that are locked up in these companies. While in this case the contagion seems limited to crypto for now, the domino effect of other crypto lenders declaring bankruptcy cannot be ignored.“We’ve never once pitched ourselves as risk-free, like a simple yield.”
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