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Three Arrows Capital has defaulted on a loan worth more than $670M

375 points by misiti3780 4y ago

deleted 4y ago
[deleted]
dmos62 4y ago
Article has a refreshingly neutral tone. I wish all news were like this.
- jcstauffer 4y ago
  I particularly like how they neutrally listed all the assets and lines of credit of Voyager Digital (the loan holder) without mentioning that they add up to just $655M (< $670MM), meaning that they are now insolvent.
  - TameAntelope 4y ago
    I don't think defaulting on a loan means you're going to pay $0.00 on that loan, just that you've missed a payment (plus whatever grace period is given).
    - retcon 4y ago
      Default means that you are or have been technically deemed incapable of making any further payments. This includes repaying the principal outstanding. You're confusing any potential amount ultimately recoverable in insolvency with some kind of imaginary ex gratia payment by a management of a imaginary going concern which absolutely doesn't exist in Ch.12. Its chapter12 in the circumstances conceived.
      - happyopossum 4y ago
        > Default means that you are or have been technically deemed incapable of making any further payments Nope, that's not correct. Loan default occurs when a borrower fails to pay back a debt according to the initial arrangement - it most assuredly does not mean that no further payments will ever come (or be extracted via judgement).
        jsemrau 4y ago
        To expand a bit more. At least in the SOPs that I wrote, is a loan declared default if a repayment of (interest and/or principal) has not been received after a certain cutoff (30+, 60+, 90+) or the company has been declared bankrupt, dead, or similar (hard trigger events) For the latter, this is why petitions like these matter: https://www.reuters.com/business/china-evergrande-faces-winding-up-lawsuit-hong-kong-2022-06-27/ https://www.reuters.com/business/china-evergrande-faces-wind...
  - hgsgm 4y ago
    lines credit aren't assets, they don't add to assets, except in the sense of short term liquidity. They don't create solvency. They are deeply insolvent because their lines of credit are far in excessive of their assets.
rvz 4y ago
Good. Looks like this cycle has claimed tons of over leveraged VCs and deluded crypto bros and maxis thinking that Bitcoin will reach $100K last year. Instead they all got liquidated. We were overdue a wiping out of these gamblers and speculators as regulations will be formed to limit or prevent having another UST, USDD and Celsius. Either way the smart money takes advantage of the hype and prepares well in advance for the great possibility of a crash.
- arcticbull 4y ago
  USDD isn't like Terra. It's not actually an algorithmic stablecoin, it's just 'His Excellency' Justin Sun messing with people. There's no redemption mechanism (which is what lead to the UST collapse) and the creation is limited to a few authorized participants - notably Alameda. Sun can restore the peg pretty much at will for a few million bucks. [edit] To be clear I maintain you should stay as far away as humanly possible, but shorting it is a suckers bet.
  - randomhodler84 4y ago
    Yeah, don’t short USDD (at least not yet). If Justin using His Excellencies personal wealth to bail out His Excellencies stablecoin sideproject, wait at least until the market cap goes beyond what he can bail out. It’s currently 3x over collateralized, you will lose.
    - arcticbull 4y ago
      Sort of, I believe they count anything they put in their burn address towards the 'overcollateralization' - but my point is also that redemptions are turned off. No matter how much collateral they have there's no mechanism to turn 1USDD into 1USD worth of any collateral at all. Conducting open market operations (buying up USDD in the market) is significantly cheaper than redeeming them. Last I checked it would cost about $30M to restore the peg in open market operations.
      - randomhodler84 4y ago
paywallasinbeer 4y ago
For anyone else enjoying the crypto meltdown, might I suggest the subreddit /r/buttcoin? It's quite enjoyable. https://old.reddit.com/r/Buttcoin/ https://old.reddit.com/r/Buttcoin/
- jklinger410 4y ago
  Celebrating another person's failure is for small minds.
  - bilbo0s 4y ago
    We all do it pretty much all the time. Whether we're talking about hostile governments we don't like. Companies we don't like. Groups of people we don't like. We make jokes about them all the time. It's just crypto's turn.
  - AlexandrB 4y ago
    What would you call "have fun staying poor"?
- niclo 4y ago
  > It's quite enjoyable. Not really, it's full of people hating and insulting and pretty much comparable to the average crypto bro subreddit.
  - sweezyjeezy 4y ago
    Even if it is trolling - that's orders of magnitude less harmful to society than a subreddit that offers dangerous financial advice.
    - SV_BubbleTime 4y ago
      Also less harmful than promoting the latest single waste of energy the world has ever seen… yet.
      - 4y ago
CoastalCoder 4y ago
I always have mixed feelings when someone is warned about the riskiness / foolishness / stupidity of a course of action, and then suffers for it. On the one hand, there's a certain satisfaction or Schadenfreude in the sense of vindication. And it's pleasant to feel like my own wisdom or self-control has been validated. OTOH, I know that everyone has limited wisdom / self-control / intelligence, including me. So it seems hypocritical to mock someone who trips, knowing that I'm just lucky to sometimes avoid the hazards that would trip me up. In the end, about the only conclusions I'm really confident in is that trouble besets us all, and usually it's good to default to kindness and sympathy. EDIT FOR CLARIFICATION: I'm not saying that I want swindlers to succeed. I want such predation crushed into dust. My comment is about the people who don't intend harm to others.
- blackoil 4y ago
  It is in line of 'a death is tragedy, a million statistics.' when thousands of people are losing it in a ponzi scheme, it becomes a matter of memes and I told you so.
  - Tao3300 4y ago
    Something Stalin may have said regarding the Soviet war dead is irrelevant here. Hypothetically speaking, if I really did warn someone, and they told me to "have fun staying poor!" or I pointed out the potential for a catastrophic collapse and the founder dismissed it as "r_tarded" and comparable events came to pass... I say bring on the memes for those people.
    - cosmodisk 4y ago
      That's exactly what I got told. Then there was something about yachts and champagne. Yeah, right
- arcticbull 4y ago
  All that 'ngmi' culture is coming home to roost. This isn't a bunch of kind old grandmothers getting suckered in by Madoff.
yieldcrv 4y ago
This has been a slow motion trainwreck across crypto twitter (echoed sometimes in financial publications) and this is the first mainstream source out there. Finally. I definitely would like to see more things about specific organizations. Indictments about crypto as a whole just allows poorly run organizations to avoid scrutiny. Now if only there were mainstream news articles about all the things that go right in crypto. Its so peculiar and easy to tell when people have never considered anything aside from a barrage of negative headlines. Reminds me of the 90s when an older person at the time would say like "the 'puters always get viruses" as a reason to not explore the concept further, as if that was the whole experience.
- badcppdev 4y ago
  > Now if only there were mainstream news articles about all the things that go right in crypto. Legitimate question. What things have gone right in Crypto? I'm excluding individuals getting rich as that can happen due to gambling, etc.
  - ntoskrnl 4y ago
    One example: Ukraine's military has been using bitcoin to pay their suppliers. The bitcoin network is antifragile and not vulnerable to attack the way their traditional banking infrastructure has shown to be. When searching I mostly found results on crypto news sites (naturally), but here are some mainstream sources: https://time.com/6155209/ukraine-crypto/ https://time.com/6155209/ukraine-crypto/ https://apnews.com/article/russia-ukraine-cryptocurrency-technology-business-bitcoin-812902c5dd1474692be3d8d040ba7bda https://apnews.com/article/russia-ukraine-cryptocurrency-tec...
    - roywiggins 4y ago
      There's no real problems with donating fiat to Ukraine, you can send money to them no problem. https://u24.gov.ua/ https://u24.gov.ua/ As far as I can tell the reason they bought a bunch of stuff with crypto is because crypto fans gave them a bunch of crypto, not because they need to route around actual problems with the banking system. Of course Ukraine would make noises about how much they like crypto, because anything that encourages crypto holders to donate is good for them. Even if they prefer fiat they probably won't complain- making crypto donors feel good about giving them money (because it is acting as an advertisement for crypto generally) is a good idea for Ukraine.
55555 4y ago
I really don’t understand the business model of making massive fiat loans to “firms” to buy bitcoin. If crypto goes up, you get a small amount of interest. If crypto goes down, you lose everything. What? Lol. Just spend a fraction of the sum on bitcoin and do something safe with the rest. What was the plan? Edit: I guess when someone has “20 billion dollars” a 700mm loan doesn’t seem like a big risk.
- spamizbad 4y ago
  I think a lot of these projects are less rational and more ideological. People are desperate for applications of crypto, because the survival of the ecosystem depends on it, so they’re willing to chase down high risk / low reward ventures to keep the music going.
  - doopy1 4y ago
    Firms like 3AC exist only to funnel as much money as possible into the crypto economy, most of it raised from ultra-high net worth individuals that won't miss this money at all. They place huge bets, because it's a land grab and the folks that work there got paid already.
- atwood22 4y ago
  It's called picking up pennies in front of a steam roller.
  - a4isms 4y ago
    Also “picking up nickels off of railroad tracks.” It’s very seductive. I like the railroad tracks analogy because in my real-world experience, railroad tracks can be seldom-used, and look like they’ve been abandoned. But every once in a while, something does come driving down it, be it a full train or maybe a pickup truck outfitted with bogeys, belonging to the company. But only once in a while. If you don’t see one for months, you convince yourself you’ll never see one.
- gowld 4y ago
  The people making the loans are also speculating on crypto with other funds. The loans exist to pump the price up by fooling "technical" traders. It's market manipulation.
015a 4y ago
> As of Friday, Voyager said it had approximately $137 million in U.S. dollars and owned crypto assets. > Last week, Alameda (FTX founder Sam Bankman-Fried’s quantitative trading firm) committed $500 million in financing to Voyager Digital, a crypto brokerage. Voyager has already pulled $75 million from that line of credit. Am I misunderstanding something, or: what kind of mismanagement could possibly lead to loans being given out to a single entity representing, like, over 70% of the entire value of your organization (pre-default)? Its excellent that FTX/Alameda stepped in to keep them solvent and not allow this to spiral further, but at the same time, its incomprehensible to me that Voyager allowed this to happen; so incomprehensible that it feels like I'm misunderstanding something.
- siskiyou 4y ago
  Stepping in to support the wages of mismanagement may not seem so excellent if the situation worsens further
  - deleted 4y ago
    [deleted]
- mirntyfirty 4y ago
  I think it’s a strange part of human psychology to ignore objective reality and double down to complete ruin. It seems remarkably common and with corporate power being so concentrated at the top it seems rather easy for these situations to happen.
  - wjko21 4y ago
    I think the reason is that safety nets our system provides to big businesses (especially "too big to fail" ones) incentivizes them to take risks. If you have a 50/50 chance to strike gold or loose tons of someone else's money, why not take it. If it pans out, you get a lot of bonus $$$, if it doesn't - it's no skin off your back.
    - gopher_space 4y ago
LatteLazy 4y ago
I am confused: The only logical reason to borrow BTC is if you think it will go down. If Three Arrow really thought BTC was headed to 2.5m a coin, then they could never sell/spend the coins they borrowed, as the price of buying back to repay the loan would be too high. So logically they must have been shorting BTC. And if they were shorting BTC, they should have made ~30% profit in the last few months right? So what the fuck is actually happening here? Were they lying about being bullish on BTC? And they somehow made an even bigger loss somewhere else that means their BTC short isn't enough to counter that? Or what?
- based69 4y ago
  You can borrow btc then use that btc to take 5x leveraged positions on btc. If number go up, you make billions. If number go down 20% you default on loan. Absolute scumbag behaviour of course.
  - LatteLazy 4y ago
    I guess that makes more sense. But then you're only 4x exposed to BTC (god help you). Why not borrow USD and do the same and get 5x leverage What's that thing about if you owe the bank 10k you're in trouble, but if you owe them 10m they're in trouble? :)
    - akgoel 4y ago
      Because BTC kept going up fast, and your 4X BTC bet meant you got keep borrowing more to plow back into BTC.
    - acdha 4y ago
      I wonder whether it could be as simple as getting a loan in USD requiring stricter terms: he seems like the kind of guy who’d balk at doing more work to get less money, even if that’s ill-advised from a risk perspective.
- dropnerd 4y ago
  3ac probably made 3 bad trades: - long ust/luna - long gbtc, short btc - long steth, short eth will focus on last two trades in this comment. gbtc is like a bond that eventually pays out as btc when regulatory approval comes. steth is like a bond that eventually pays out as eth a few months post-merge. but in the aftermath of the luna/ust crisis and general crypto bear, there was a flight to safety (gbtc is less liquid than btc, steth is less liquid than eth), causing the gbtc/btc and steth/eth spreads to widen instead of narrow, and 3ac was caught out of position. tldr: they probably profited some from short btc but lost more on long gbtc.
antiverse 4y ago
I don't believe whatever news are posted these days regarding crypto. After the whole gamestop charade of people cheering on the downfall of hedgefunds, it turns out they turned a healthy profit after all and none of what was originally claimed turned out to be true. Who the fuck knows who had a dog in that race to what extend and who was publishing so much misinformation. It even made it's way here, which is why I am writing this comment on HN. There's a slew of information that these articles omit/conceal that could completely change the narrative being portrayed. There are too many misdirection plays here. People are being screwed, yes, but not the people you think (or in some cases "hope".)
jwmoz 4y ago
They were leveraged to the tits and paid the price.
xwdv 4y ago
Without crypto what will be the next delusional get rich quick scheme people will cling to?
- danans 4y ago
  What if crypto (in whatever form) is the ultimate get rich quick scam/scheme and there is always a baseline number of people willing to dump their money into it? Can an asset class be built on top of a seemingly endless hope of people hoping to get rich quick? Take out the asset class part, and it sounds a lot like a lottery, which is just a regulated get rich scheme (where most participants lose monetarily, but get "entertainment") that turns a reliable human fallibility into a social funding mechanism. Take out the social funding, and you have casinos, which also provide entertainment in exchange for the feeling you might get rich quick. Casino companies are publicly traded securities: https://www.cga.ct.gov/PS95/rpt/olr/htm/95-R-0426.htm https://www.cga.ct.gov/PS95/rpt/olr/htm/95-R-0426.htm Is there a form of crypto that could provide the same?
  - mherdeg 4y ago
    The downside with the lottery is that it's state controlled; if a group of talented engineers finds a way to play to extract positive expected value from other bettors, stakeholders in the government will call this outcome unfair and shut it down ( https://www.mass.gov/doc/letter-to-state-treasurer-steven-grossman-regarding-the-lottery-july-2012/download https://www.mass.gov/doc/letter-to-state-treasurer-steven-gr... ). Even if, on average, money goes from gamblers to social good, people will complain that sophisticated bettors are extracting an "unfair" profit. By contrast, the crypto markets provide an efficient funnel from low-information gamblers to sophisticated engineers. As long as a fair chunk of the profits are channeled to effective altruism causes (which I think is the status quo?) it's a good deal.
    - danans 4y ago
      > As long as a fair chunk of the profits are channeled to effective altruism causes (which I think is the status quo?) That's one heck of a qualification without a citation. The "altruism causes" channeled to would need to somehow outweigh the massive costs in terms of CO2 footprint and the loss of savings/security of an untold number of regular people (your "low-information gamblers") who bought into a big ponzi scheme. They can't be made whole (though society will definitionally pay for the subset who lost a significant portion of their life savings), but seems pretty legit to point a finger at those who scammed them.
bearjaws 4y ago
Will this force any other leveraged positions out? Really unclear what the ramifications are besides potentially dissolving the hedge fund. Crypto hasn't dropped too much as a result (~2% drop)
midislack 4y ago
Imagine giving your money to anarchists and then you get scammed. They have a hate symbol on their site, LOL.
- happyopossum 4y ago
  > They have a hate symbol on their site, LOL. Care to elaborate? I see one graphic on the 3ac website, and it's not one I'm familiar with so I assume it's a corp logo?
  - woodruffw 4y ago
    I think the GP is claiming that the 3AC logo is a reference to the Three Arrows[1] logo, which was used by the SPD in Weimar Germany and by some flavors of contemporary anarchists. But I can't find any evidence that it's an intended reference, and they look pretty different to me (different colors and directions; the only similarity is that they both happen to have arrows). [1]: https://en.wikipedia.org/wiki/Three_Arrows https://en.wikipedia.org/wiki/Three_Arrows
    - deleted 4y ago
      [deleted]
    - masswerk 4y ago
      I don't get the hate part. There was about a single competing party who would have used that attribute, and this one proceeded to ban the associated party and to open the very first concentration camps for social democrats. We probably all know how things went from there.
      - woodruffw 4y ago
        Correct. They weren't a hate group, and the groups that currently use their symbology also aren't hate groups. I think the GP is probably misinformed.
        4y ago
timcavel 4y ago
2-718-281-828 4y ago
Any news on Evergrande? I thought the world was supposed to go under last year ...
- chasd00 4y ago
  The thing about that is the Chinese government can just declare it’s no longer a problem and then it’s no longer a problem. Just like they can solve Covid outbreaks through starvation, separated families, and doors welded shut. When you’re free from morality or repercussions then all problems are easily solvable.
  - adam_arthur 4y ago
    They can't really do that because Firm A may depend on Firm B's payment to stay afloat. So you can't just say Firm B doesn't have to pay A and all is well. Also if a Firm defaults on its debt obligations, nobody will choose to lend to that Firm in the future. Certainly it still may be possible to untangle the situation by shifting losses to those who can bear it (socialize them), but it's not as simple as you make it sound. Have to work out a whole graph of dependencies. Lehman Brothers had something like $50T of value in underwater derivatives. Good luck solving that
    - dillondoyle 4y ago
      Many problems aside, they could just print or give money.
      - adam_arthur 4y ago
        Yeah, check with South America on how that works out. It can be done to a certain extent, but obviously these aren't cost free solutions.
        bilbo0s 4y ago
        South Am governments are dependent on banks in other parts of the world. The Chinese government is not. There's just some realities about global economics. Uruguay, Portugal, or Rwanda default, then they have a problem. China or US has the same issues, and it's just not the same kind of problem. They would just redefine things so that they don't default and then call the whole thing a "bailout". I'm not ragging on south americans or africans or portuguese, I'm just stating facts. It's not fair, but that's how the global system works. You do business with China or the US, you find out fairly early on that even in a crisis, it's their way or the highway.
christopherbalz 4y ago
Not your keys, not your coins.
- dropnerd 4y ago
  defi/spot is in a much healthier place than cefi. when you're hodling, there's nothing that can liquidate you. when you're using a defi protocol, you capture all the upside for the risk you're taking. when you're using a cefi "bank", the bank keeps some of the spread when they're up, and goes insolvent when they're down. heads they win tails you lose.
99_00 4y ago
For asset managers high risk pays. Make amazing bonuses for many years. Have extended vacation or retire. Just don't use your own product and you will do well.
ursuscamp 4y ago
I'm sure this doesn't apply to many here here, but: Do not trust leverage-trading crypto banks. Do not trade on leverage. These systems just recreate our current system of debt-based money that will inevitably collapse when the easy money dries up. If you believe Bitcoin has a future like I do, then buy some Bitcoin and hold it in cold storage for a long time, or try to jumpstart a circular economy where you use Bitcoin to buy and sell goods. Don't try to recreate the current system with fake decentralization.
- xwolfi 4y ago
  Notice that this guy used the lexical domain of religious belief. Not even trying to explain why, just "if you believe, come to my church".
  - rufusroflpunch 4y ago
    This is a goofy response. Belief isn’t a religious word. I could write an entire treatise on Bitcoin in my comment, but no one would read it, and besides that, the audience of my comment are people already convinced of its value.
Barrera 4y ago
> Prominent crypto hedge fund Three Arrows Capital has defaulted on a loan worth more than $670 million. Digital asset brokerage Voyager Digital issued a notice on Monday morning, stating that the fund failed to repay a loan of $350 million in the U.S. dollar-pegged stablecoin, USDC, and 15,250 bitcoin, worth about $323 million at today’s prices. In other words, the $670 million that 3AC defaulted on was ~50:50 USDC and bitcoin. Then later: > Zhu [3AC founder] is known for his incredibly bullish view of bitcoin. He said last year the world’s largest cryptocurrency could be worth $2.5 million per coin. But in May this year, as the crypto market began its meltdown, Zhu said on Twitter that his “supercycle price thesis was regrettably wrong.” This seems odd. How does a person convinced that bitcoin exchange is headed to $2.5 million take out a loan of 15K bitcoin if he actually thinks he'll be paying back it back at a higher exchange rate? Either the founder was bullish in principle but bearish in practice, or didn't have the first clue about what he was doing.
- anm89 4y ago
  I think you would have to know more about how the deal was structured before making these assumptions. You could hedge out directional risk in an asset while borrowing it. I think it's doubtful this position was net short bitcoin. Or you are right, they were unbelievably naive.
  - vkou 4y ago
    I think option #3 is the most likely one - they didn't actually believe what they were saying.
- rchaud 4y ago
  > How does a person convinced that bitcoin exchange is headed to $2.5 million take out a loan of 15K bitcoin if he actually thinks he'll be paying back it back at a higher exchange rate? Part of being in crypto involves suspending disbelief, even your own. There's also the famous saying "It is difficult to get a man to understand something when his salary depends on his not understanding it". In this case, you don't build a following in crypto by being bearish, ever. It's all about kumbayah and spreading positive vibes in the "community"
woah 4y ago
This doesn't have a whole lot to do with crypto really. The entities discussed in the article are all traditional investment funds who made some risky bets.
- myle 4y ago
  In what was that risky bet?
- graeme 4y ago
  That’s like saying that banks making risky bets on CDOs in 2008 had nothing to do with housing
  - dropnerd 4y ago
    i think what they're trying to say is that these firms just look like traditional trading firms, not like defi. opaque backroom billion dollar handshakes go wrong, contagion spreads, ltcm/2008 style. main difference- there's no government bailout coming.
    - kayamon 4y ago
      There'll be a bailout. They don't let the rich folks go poor.
      - dropnerd 4y ago
        there might be some corporate firesales, but what makes you think any government is going to backstop the crypto market to prevent contagion?
groffee 4y ago
If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem. J. Paul Getty.
- cwp 4y ago
  A Civ VI fan, I see.
henning 4y ago
I'm sure the creditors will happily accept payment in Bitcoin in lieu of cash. it's dIgItAL gOlD except the digital gold can be copied and pasted to make a new kind of digital gold that is identical to the other gold, completely unlike actual physical gold.
- randomhodler84 4y ago
  21 million Bitcoin. 2.1 Quadrillion Satoshi. For all time. Unlike gold which can be mined in the trillions from asteroids. Your argument that Bitcoin is trivially copyable was /an/ argument in 2014. We are in a different place now.
  - henning 4y ago
    > Unlike gold which can be mined in the trillions from asteroids. Congratulations, this is the stupidest thing I've read on Hacker News. Asteroid mining is not feasible and may never be. If an argument was valid in 2014 and the logic behind that argument has not changed, it remains valid. People are still making pointless coins and getting big-name social media personalities to promote them.
    - randomhodler84 4y ago
      Why not?
Hypocritelefty 4y ago
[dead]
theknocker 4y ago
dang 4y ago
Related: Another Big Crypto Player Just Blew Up - https://news.ycombinator.com/item?id=31794111 https://news.ycombinator.com/item?id=31794111 - June 2022 (4 comments) Three Arrows Capital reportedly facing insolvency - https://news.ycombinator.com/item?id=31784602 https://news.ycombinator.com/item?id=31784602 - June 2022 (377 comments) Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout - https://news.ycombinator.com/item?id=31777441 https://news.ycombinator.com/item?id=31777441 - June 2022 (125 comments) Crypto hedge fund Three Arrows fails to meet lender margin calls - https://news.ycombinator.com/item?id=31769163 https://news.ycombinator.com/item?id=31769163 - June 2022 (1 comment) Rumors Swirl About Financial Stress at Three Arrows - https://news.ycombinator.com/item?id=31748345 https://news.ycombinator.com/item?id=31748345 - June 2022 (2 comments)

375 points by misiti3780 4y ago

deleted 4y ago

[deleted]

dmos62 4y ago

Article has a refreshingly neutral tone. I wish all news were like this.

jcstauffer 4y ago
I particularly like how they neutrally listed all the assets and lines of credit of Voyager Digital (the loan holder) without mentioning that they add up to just $655M (< $670MM), meaning that they are now insolvent.
- TameAntelope 4y ago
  I don't think defaulting on a loan means you're going to pay $0.00 on that loan, just that you've missed a payment (plus whatever grace period is given).
  - retcon 4y ago
    Default means that you are or have been technically deemed incapable of making any further payments. This includes repaying the principal outstanding. You're confusing any potential amount ultimately recoverable in insolvency with some kind of imaginary ex gratia payment by a management of a imaginary going concern which absolutely doesn't exist in Ch.12. Its chapter12 in the circumstances conceived.
    - happyopossum 4y ago
      > Default means that you are or have been technically deemed incapable of making any further payments Nope, that's not correct. Loan default occurs when a borrower fails to pay back a debt according to the initial arrangement - it most assuredly does not mean that no further payments will ever come (or be extracted via judgement).
      - jsemrau 4y ago
        To expand a bit more. At least in the SOPs that I wrote, is a loan declared default if a repayment of (interest and/or principal) has not been received after a certain cutoff (30+, 60+, 90+) or the company has been declared bankrupt, dead, or similar (hard trigger events) For the latter, this is why petitions like these matter: https://www.reuters.com/business/china-evergrande-faces-winding-up-lawsuit-hong-kong-2022-06-27/ https://www.reuters.com/business/china-evergrande-faces-wind...
- hgsgm 4y ago
  lines credit aren't assets, they don't add to assets, except in the sense of short term liquidity. They don't create solvency. They are deeply insolvent because their lines of credit are far in excessive of their assets.

rvz 4y ago

Good. Looks like this cycle has claimed tons of over leveraged VCs and deluded crypto bros and maxis thinking that Bitcoin will reach $100K last year. Instead they all got liquidated. We were overdue a wiping out of these gamblers and speculators as regulations will be formed to limit or prevent having another UST, USDD and Celsius. Either way the smart money takes advantage of the hype and prepares well in advance for the great possibility of a crash.

arcticbull 4y ago
USDD isn't like Terra. It's not actually an algorithmic stablecoin, it's just 'His Excellency' Justin Sun messing with people. There's no redemption mechanism (which is what lead to the UST collapse) and the creation is limited to a few authorized participants - notably Alameda. Sun can restore the peg pretty much at will for a few million bucks. [edit] To be clear I maintain you should stay as far away as humanly possible, but shorting it is a suckers bet.
- randomhodler84 4y ago
  Yeah, don’t short USDD (at least not yet). If Justin using His Excellencies personal wealth to bail out His Excellencies stablecoin sideproject, wait at least until the market cap goes beyond what he can bail out. It’s currently 3x over collateralized, you will lose.
  - arcticbull 4y ago
    Sort of, I believe they count anything they put in their burn address towards the 'overcollateralization' - but my point is also that redemptions are turned off. No matter how much collateral they have there's no mechanism to turn 1USDD into 1USD worth of any collateral at all. Conducting open market operations (buying up USDD in the market) is significantly cheaper than redeeming them. Last I checked it would cost about $30M to restore the peg in open market operations.
    - randomhodler84 4y ago

paywallasinbeer 4y ago

For anyone else enjoying the crypto meltdown, might I suggest the subreddit /r/buttcoin? It's quite enjoyable. https://old.reddit.com/r/Buttcoin/ https://old.reddit.com/r/Buttcoin/

jklinger410 4y ago
Celebrating another person's failure is for small minds.
- bilbo0s 4y ago
  We all do it pretty much all the time. Whether we're talking about hostile governments we don't like. Companies we don't like. Groups of people we don't like. We make jokes about them all the time. It's just crypto's turn.
- AlexandrB 4y ago
  What would you call "have fun staying poor"?
niclo 4y ago
> It's quite enjoyable. Not really, it's full of people hating and insulting and pretty much comparable to the average crypto bro subreddit.
- sweezyjeezy 4y ago
  Even if it is trolling - that's orders of magnitude less harmful to society than a subreddit that offers dangerous financial advice.
  - SV_BubbleTime 4y ago
    Also less harmful than promoting the latest single waste of energy the world has ever seen… yet.
    - 4y ago

CoastalCoder 4y ago

I always have mixed feelings when someone is warned about the riskiness / foolishness / stupidity of a course of action, and then suffers for it. On the one hand, there's a certain satisfaction or Schadenfreude in the sense of vindication. And it's pleasant to feel like my own wisdom or self-control has been validated. OTOH, I know that everyone has limited wisdom / self-control / intelligence, including me. So it seems hypocritical to mock someone who trips, knowing that I'm just lucky to sometimes avoid the hazards that would trip me up. In the end, about the only conclusions I'm really confident in is that trouble besets us all, and usually it's good to default to kindness and sympathy. EDIT FOR CLARIFICATION: I'm not saying that I want swindlers to succeed. I want such predation crushed into dust. My comment is about the people who don't intend harm to others.

blackoil 4y ago
It is in line of 'a death is tragedy, a million statistics.' when thousands of people are losing it in a ponzi scheme, it becomes a matter of memes and I told you so.
- Tao3300 4y ago
  Something Stalin may have said regarding the Soviet war dead is irrelevant here. Hypothetically speaking, if I really did warn someone, and they told me to "have fun staying poor!" or I pointed out the potential for a catastrophic collapse and the founder dismissed it as "r_tarded" and comparable events came to pass... I say bring on the memes for those people.
  - cosmodisk 4y ago
    That's exactly what I got told. Then there was something about yachts and champagne. Yeah, right
arcticbull 4y ago
All that 'ngmi' culture is coming home to roost. This isn't a bunch of kind old grandmothers getting suckered in by Madoff.

yieldcrv 4y ago

This has been a slow motion trainwreck across crypto twitter (echoed sometimes in financial publications) and this is the first mainstream source out there. Finally. I definitely would like to see more things about specific organizations. Indictments about crypto as a whole just allows poorly run organizations to avoid scrutiny. Now if only there were mainstream news articles about all the things that go right in crypto. Its so peculiar and easy to tell when people have never considered anything aside from a barrage of negative headlines. Reminds me of the 90s when an older person at the time would say like "the 'puters always get viruses" as a reason to not explore the concept further, as if that was the whole experience.

badcppdev 4y ago
> Now if only there were mainstream news articles about all the things that go right in crypto. Legitimate question. What things have gone right in Crypto? I'm excluding individuals getting rich as that can happen due to gambling, etc.
- ntoskrnl 4y ago
  One example: Ukraine's military has been using bitcoin to pay their suppliers. The bitcoin network is antifragile and not vulnerable to attack the way their traditional banking infrastructure has shown to be. When searching I mostly found results on crypto news sites (naturally), but here are some mainstream sources: https://time.com/6155209/ukraine-crypto/ https://time.com/6155209/ukraine-crypto/ https://apnews.com/article/russia-ukraine-cryptocurrency-technology-business-bitcoin-812902c5dd1474692be3d8d040ba7bda https://apnews.com/article/russia-ukraine-cryptocurrency-tec...
  - roywiggins 4y ago
    There's no real problems with donating fiat to Ukraine, you can send money to them no problem. https://u24.gov.ua/ https://u24.gov.ua/ As far as I can tell the reason they bought a bunch of stuff with crypto is because crypto fans gave them a bunch of crypto, not because they need to route around actual problems with the banking system. Of course Ukraine would make noises about how much they like crypto, because anything that encourages crypto holders to donate is good for them. Even if they prefer fiat they probably won't complain- making crypto donors feel good about giving them money (because it is acting as an advertisement for crypto generally) is a good idea for Ukraine.

55555 4y ago

I really don’t understand the business model of making massive fiat loans to “firms” to buy bitcoin. If crypto goes up, you get a small amount of interest. If crypto goes down, you lose everything. What? Lol. Just spend a fraction of the sum on bitcoin and do something safe with the rest. What was the plan? Edit: I guess when someone has “20 billion dollars” a 700mm loan doesn’t seem like a big risk.

spamizbad 4y ago
I think a lot of these projects are less rational and more ideological. People are desperate for applications of crypto, because the survival of the ecosystem depends on it, so they’re willing to chase down high risk / low reward ventures to keep the music going.
- doopy1 4y ago
  Firms like 3AC exist only to funnel as much money as possible into the crypto economy, most of it raised from ultra-high net worth individuals that won't miss this money at all. They place huge bets, because it's a land grab and the folks that work there got paid already.
atwood22 4y ago
It's called picking up pennies in front of a steam roller.
- a4isms 4y ago
  Also “picking up nickels off of railroad tracks.” It’s very seductive. I like the railroad tracks analogy because in my real-world experience, railroad tracks can be seldom-used, and look like they’ve been abandoned. But every once in a while, something does come driving down it, be it a full train or maybe a pickup truck outfitted with bogeys, belonging to the company. But only once in a while. If you don’t see one for months, you convince yourself you’ll never see one.
gowld 4y ago
The people making the loans are also speculating on crypto with other funds. The loans exist to pump the price up by fooling "technical" traders. It's market manipulation.

015a 4y ago

> As of Friday, Voyager said it had approximately $137 million in U.S. dollars and owned crypto assets. > Last week, Alameda (FTX founder Sam Bankman-Fried’s quantitative trading firm) committed $500 million in financing to Voyager Digital, a crypto brokerage. Voyager has already pulled $75 million from that line of credit. Am I misunderstanding something, or: what kind of mismanagement could possibly lead to loans being given out to a single entity representing, like, over 70% of the entire value of your organization (pre-default)? Its excellent that FTX/Alameda stepped in to keep them solvent and not allow this to spiral further, but at the same time, its incomprehensible to me that Voyager allowed this to happen; so incomprehensible that it feels like I'm misunderstanding something.

siskiyou 4y ago
Stepping in to support the wages of mismanagement may not seem so excellent if the situation worsens further
- deleted 4y ago
  [deleted]
mirntyfirty 4y ago
I think it’s a strange part of human psychology to ignore objective reality and double down to complete ruin. It seems remarkably common and with corporate power being so concentrated at the top it seems rather easy for these situations to happen.
- wjko21 4y ago
  I think the reason is that safety nets our system provides to big businesses (especially "too big to fail" ones) incentivizes them to take risks. If you have a 50/50 chance to strike gold or loose tons of someone else's money, why not take it. If it pans out, you get a lot of bonus $$$, if it doesn't - it's no skin off your back.
  - gopher_space 4y ago

LatteLazy 4y ago

I am confused: The only logical reason to borrow BTC is if you think it will go down. If Three Arrow really thought BTC was headed to 2.5m a coin, then they could never sell/spend the coins they borrowed, as the price of buying back to repay the loan would be too high. So logically they must have been shorting BTC. And if they were shorting BTC, they should have made ~30% profit in the last few months right? So what the fuck is actually happening here? Were they lying about being bullish on BTC? And they somehow made an even bigger loss somewhere else that means their BTC short isn't enough to counter that? Or what?

based69 4y ago
You can borrow btc then use that btc to take 5x leveraged positions on btc. If number go up, you make billions. If number go down 20% you default on loan. Absolute scumbag behaviour of course.
- LatteLazy 4y ago
  I guess that makes more sense. But then you're only 4x exposed to BTC (god help you). Why not borrow USD and do the same and get 5x leverage What's that thing about if you owe the bank 10k you're in trouble, but if you owe them 10m they're in trouble? :)
  - akgoel 4y ago
    Because BTC kept going up fast, and your 4X BTC bet meant you got keep borrowing more to plow back into BTC.
  - acdha 4y ago
    I wonder whether it could be as simple as getting a loan in USD requiring stricter terms: he seems like the kind of guy who’d balk at doing more work to get less money, even if that’s ill-advised from a risk perspective.
dropnerd 4y ago
3ac probably made 3 bad trades: - long ust/luna - long gbtc, short btc - long steth, short eth will focus on last two trades in this comment. gbtc is like a bond that eventually pays out as btc when regulatory approval comes. steth is like a bond that eventually pays out as eth a few months post-merge. but in the aftermath of the luna/ust crisis and general crypto bear, there was a flight to safety (gbtc is less liquid than btc, steth is less liquid than eth), causing the gbtc/btc and steth/eth spreads to widen instead of narrow, and 3ac was caught out of position. tldr: they probably profited some from short btc but lost more on long gbtc.

antiverse 4y ago

I don't believe whatever news are posted these days regarding crypto. After the whole gamestop charade of people cheering on the downfall of hedgefunds, it turns out they turned a healthy profit after all and none of what was originally claimed turned out to be true. Who the fuck knows who had a dog in that race to what extend and who was publishing so much misinformation. It even made it's way here, which is why I am writing this comment on HN. There's a slew of information that these articles omit/conceal that could completely change the narrative being portrayed. There are too many misdirection plays here. People are being screwed, yes, but not the people you think (or in some cases "hope".)

jwmoz 4y ago

They were leveraged to the tits and paid the price.

xwdv 4y ago

Without crypto what will be the next delusional get rich quick scheme people will cling to?

danans 4y ago
What if crypto (in whatever form) is the ultimate get rich quick scam/scheme and there is always a baseline number of people willing to dump their money into it? Can an asset class be built on top of a seemingly endless hope of people hoping to get rich quick? Take out the asset class part, and it sounds a lot like a lottery, which is just a regulated get rich scheme (where most participants lose monetarily, but get "entertainment") that turns a reliable human fallibility into a social funding mechanism. Take out the social funding, and you have casinos, which also provide entertainment in exchange for the feeling you might get rich quick. Casino companies are publicly traded securities: https://www.cga.ct.gov/PS95/rpt/olr/htm/95-R-0426.htm https://www.cga.ct.gov/PS95/rpt/olr/htm/95-R-0426.htm Is there a form of crypto that could provide the same?
- mherdeg 4y ago
  The downside with the lottery is that it's state controlled; if a group of talented engineers finds a way to play to extract positive expected value from other bettors, stakeholders in the government will call this outcome unfair and shut it down ( https://www.mass.gov/doc/letter-to-state-treasurer-steven-grossman-regarding-the-lottery-july-2012/download https://www.mass.gov/doc/letter-to-state-treasurer-steven-gr... ). Even if, on average, money goes from gamblers to social good, people will complain that sophisticated bettors are extracting an "unfair" profit. By contrast, the crypto markets provide an efficient funnel from low-information gamblers to sophisticated engineers. As long as a fair chunk of the profits are channeled to effective altruism causes (which I think is the status quo?) it's a good deal.
  - danans 4y ago
    > As long as a fair chunk of the profits are channeled to effective altruism causes (which I think is the status quo?) That's one heck of a qualification without a citation. The "altruism causes" channeled to would need to somehow outweigh the massive costs in terms of CO2 footprint and the loss of savings/security of an untold number of regular people (your "low-information gamblers") who bought into a big ponzi scheme. They can't be made whole (though society will definitionally pay for the subset who lost a significant portion of their life savings), but seems pretty legit to point a finger at those who scammed them.

bearjaws 4y ago

Will this force any other leveraged positions out? Really unclear what the ramifications are besides potentially dissolving the hedge fund. Crypto hasn't dropped too much as a result (~2% drop)

midislack 4y ago

Imagine giving your money to anarchists and then you get scammed. They have a hate symbol on their site, LOL.

happyopossum 4y ago
> They have a hate symbol on their site, LOL. Care to elaborate? I see one graphic on the 3ac website, and it's not one I'm familiar with so I assume it's a corp logo?
- woodruffw 4y ago
  I think the GP is claiming that the 3AC logo is a reference to the Three Arrows[1] logo, which was used by the SPD in Weimar Germany and by some flavors of contemporary anarchists. But I can't find any evidence that it's an intended reference, and they look pretty different to me (different colors and directions; the only similarity is that they both happen to have arrows). [1]: https://en.wikipedia.org/wiki/Three_Arrows https://en.wikipedia.org/wiki/Three_Arrows
  - deleted 4y ago
    [deleted]
  - masswerk 4y ago
    I don't get the hate part. There was about a single competing party who would have used that attribute, and this one proceeded to ban the associated party and to open the very first concentration camps for social democrats. We probably all know how things went from there.
    - woodruffw 4y ago
      Correct. They weren't a hate group, and the groups that currently use their symbology also aren't hate groups. I think the GP is probably misinformed.
      - 4y ago

timcavel 4y ago

2-718-281-828 4y ago

Any news on Evergrande? I thought the world was supposed to go under last year ...

chasd00 4y ago
The thing about that is the Chinese government can just declare it’s no longer a problem and then it’s no longer a problem. Just like they can solve Covid outbreaks through starvation, separated families, and doors welded shut. When you’re free from morality or repercussions then all problems are easily solvable.
- adam_arthur 4y ago
  They can't really do that because Firm A may depend on Firm B's payment to stay afloat. So you can't just say Firm B doesn't have to pay A and all is well. Also if a Firm defaults on its debt obligations, nobody will choose to lend to that Firm in the future. Certainly it still may be possible to untangle the situation by shifting losses to those who can bear it (socialize them), but it's not as simple as you make it sound. Have to work out a whole graph of dependencies. Lehman Brothers had something like $50T of value in underwater derivatives. Good luck solving that
  - dillondoyle 4y ago
    Many problems aside, they could just print or give money.
    - adam_arthur 4y ago
      Yeah, check with South America on how that works out. It can be done to a certain extent, but obviously these aren't cost free solutions.
      - bilbo0s 4y ago
        South Am governments are dependent on banks in other parts of the world. The Chinese government is not. There's just some realities about global economics. Uruguay, Portugal, or Rwanda default, then they have a problem. China or US has the same issues, and it's just not the same kind of problem. They would just redefine things so that they don't default and then call the whole thing a "bailout". I'm not ragging on south americans or africans or portuguese, I'm just stating facts. It's not fair, but that's how the global system works. You do business with China or the US, you find out fairly early on that even in a crisis, it's their way or the highway.

christopherbalz 4y ago

Not your keys, not your coins.

dropnerd 4y ago
defi/spot is in a much healthier place than cefi. when you're hodling, there's nothing that can liquidate you. when you're using a defi protocol, you capture all the upside for the risk you're taking. when you're using a cefi "bank", the bank keeps some of the spread when they're up, and goes insolvent when they're down. heads they win tails you lose.

99_00 4y ago

For asset managers high risk pays. Make amazing bonuses for many years. Have extended vacation or retire. Just don't use your own product and you will do well.

ursuscamp 4y ago

I'm sure this doesn't apply to many here here, but: Do not trust leverage-trading crypto banks. Do not trade on leverage. These systems just recreate our current system of debt-based money that will inevitably collapse when the easy money dries up. If you believe Bitcoin has a future like I do, then buy some Bitcoin and hold it in cold storage for a long time, or try to jumpstart a circular economy where you use Bitcoin to buy and sell goods. Don't try to recreate the current system with fake decentralization.

xwolfi 4y ago
Notice that this guy used the lexical domain of religious belief. Not even trying to explain why, just "if you believe, come to my church".
- rufusroflpunch 4y ago
  This is a goofy response. Belief isn’t a religious word. I could write an entire treatise on Bitcoin in my comment, but no one would read it, and besides that, the audience of my comment are people already convinced of its value.

Barrera 4y ago

> Prominent crypto hedge fund Three Arrows Capital has defaulted on a loan worth more than $670 million. Digital asset brokerage Voyager Digital issued a notice on Monday morning, stating that the fund failed to repay a loan of $350 million in the U.S. dollar-pegged stablecoin, USDC, and 15,250 bitcoin, worth about $323 million at today’s prices. In other words, the $670 million that 3AC defaulted on was ~50:50 USDC and bitcoin. Then later: > Zhu [3AC founder] is known for his incredibly bullish view of bitcoin. He said last year the world’s largest cryptocurrency could be worth $2.5 million per coin. But in May this year, as the crypto market began its meltdown, Zhu said on Twitter that his “supercycle price thesis was regrettably wrong.” This seems odd. How does a person convinced that bitcoin exchange is headed to $2.5 million take out a loan of 15K bitcoin if he actually thinks he'll be paying back it back at a higher exchange rate? Either the founder was bullish in principle but bearish in practice, or didn't have the first clue about what he was doing.

anm89 4y ago
I think you would have to know more about how the deal was structured before making these assumptions. You could hedge out directional risk in an asset while borrowing it. I think it's doubtful this position was net short bitcoin. Or you are right, they were unbelievably naive.
- vkou 4y ago
  I think option #3 is the most likely one - they didn't actually believe what they were saying.
rchaud 4y ago
> How does a person convinced that bitcoin exchange is headed to $2.5 million take out a loan of 15K bitcoin if he actually thinks he'll be paying back it back at a higher exchange rate? Part of being in crypto involves suspending disbelief, even your own. There's also the famous saying "It is difficult to get a man to understand something when his salary depends on his not understanding it". In this case, you don't build a following in crypto by being bearish, ever. It's all about kumbayah and spreading positive vibes in the "community"

woah 4y ago

This doesn't have a whole lot to do with crypto really. The entities discussed in the article are all traditional investment funds who made some risky bets.

myle 4y ago
In what was that risky bet?
graeme 4y ago
That’s like saying that banks making risky bets on CDOs in 2008 had nothing to do with housing
- dropnerd 4y ago
  i think what they're trying to say is that these firms just look like traditional trading firms, not like defi. opaque backroom billion dollar handshakes go wrong, contagion spreads, ltcm/2008 style. main difference- there's no government bailout coming.
  - kayamon 4y ago
    There'll be a bailout. They don't let the rich folks go poor.
    - dropnerd 4y ago
      there might be some corporate firesales, but what makes you think any government is going to backstop the crypto market to prevent contagion?

groffee 4y ago

If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem. J. Paul Getty.

cwp 4y ago
A Civ VI fan, I see.

henning 4y ago

I'm sure the creditors will happily accept payment in Bitcoin in lieu of cash. it's dIgItAL gOlD except the digital gold can be copied and pasted to make a new kind of digital gold that is identical to the other gold, completely unlike actual physical gold.

randomhodler84 4y ago
21 million Bitcoin. 2.1 Quadrillion Satoshi. For all time. Unlike gold which can be mined in the trillions from asteroids. Your argument that Bitcoin is trivially copyable was /an/ argument in 2014. We are in a different place now.
- henning 4y ago
  > Unlike gold which can be mined in the trillions from asteroids. Congratulations, this is the stupidest thing I've read on Hacker News. Asteroid mining is not feasible and may never be. If an argument was valid in 2014 and the logic behind that argument has not changed, it remains valid. People are still making pointless coins and getting big-name social media personalities to promote them.
  - randomhodler84 4y ago
    Why not?

Hypocritelefty 4y ago

[dead]

theknocker 4y ago

dang 4y ago

Related: Another Big Crypto Player Just Blew Up - https://news.ycombinator.com/item?id=31794111 https://news.ycombinator.com/item?id=31794111 - June 2022 (4 comments) Three Arrows Capital reportedly facing insolvency - https://news.ycombinator.com/item?id=31784602 https://news.ycombinator.com/item?id=31784602 - June 2022 (377 comments) Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout - https://news.ycombinator.com/item?id=31777441 https://news.ycombinator.com/item?id=31777441 - June 2022 (125 comments) Crypto hedge fund Three Arrows fails to meet lender margin calls - https://news.ycombinator.com/item?id=31769163 https://news.ycombinator.com/item?id=31769163 - June 2022 (1 comment) Rumors Swirl About Financial Stress at Three Arrows - https://news.ycombinator.com/item?id=31748345 https://news.ycombinator.com/item?id=31748345 - June 2022 (2 comments)