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Three Arrows Capital (3AC) has hired legal and financial advisers to help the crypto hedge fund consider its options following large trading losses, the Wall Street Journal reported on Friday. 

“We have always been believers in crypto and we still are,” co-founder Kyle Davies told the WSJ in an interview. “We are committed to working things out and finding an equitable solution for all our constituent.”

The Block had earlier reported that crypto exchanges FTX, Deribit and BitMEX had liquidated 3AC’s positions after it failed to meet margin calls. 

This is a breaking story and will be updated.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Babel Finance, the Asia-based crypto financial services firm, suspended client withdrawals amid turbulence in crypto markets. 

“Due to the current situation, Babel Finance is facing unusual liquidity pressures,” according to a notice on its website on Friday. “We are in close communication with all related parties on the actions we are taking in order to best protect our customers. During this period, redemptions and withdrawals from Babel Finance products will be temporarily suspended, and resumption of normal service be notified separately.”

Babel didn’t immediately respond to a request for comment from The Block. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchanges FTX, Deribit and BitMEX have liquidated Three Arrows Capital’s positions over the past week after the crypto hedge fund known as 3AC failed to meet margin calls, three people familiar with the matter told The Block.

As a result, Singapore-based 3AC owes about $6 million to BitMEX, said one of the people. Another source described the impact on FTX as “tiny” and said Deribit, which counts 3AC among its investors, had only taken a “small” hit.

Founded in 2012 by former classmates Su Zhu and Kyle Davies, 3AC had grown into one of the largest and best known crypto hedge funds. But last month’s collapse of the Terra ecosystem resulted in a significant hit for 3AC as its investment in Terra’s native luna token sank to almost zero. 

Terra’s fallout and the ensuing crypto market turbulence have left 3AC reeling. The hedge fund has also failed to meet margin calls — when an exchange seeks fresh capital to back a leveraged bet that’s turning sour — on crypto lender BlockFi, the Financial Times reported Thursday. 

A BitMEX spokesperson confirmed to The Block that the exchange has liquidated 3AC’s positions. They declined to comment on the owed amount but said BitMEX’s legal department is in touch with 3AC on the next steps.

“This was collateralised debt and did not involve any client funds,” the spokesperson added. “We are not going to be like other brands and wax poetic about our limited exposure and strong capital position — instead, we will demonstrate it by providing our users a reliable and liquid trading venue every day, no matter the situation.” 

Deribit response

Deribit’s CEO John Jansen declined to comment specifically to The Block when reached but said, “we can confirm that Three Arrows Capital is a shareholder of our parent company since February 2020. Due to market developments Deribit has a small number of accounts that have a net debt to us that we consider as potentially distressed. Even in the event that none of this debt is repaid to us, we will remain financially healthy and operations will not be impacted.”

 An FTX spokesperson said the exchange does not comment on individual customers or accounts “unless required by law.”  

A spokesperson for Bitfinex, another exchange where 3AC traded, said the fund had closed its positions at a loss without having to be liquidated. 3AC has withdrawn all its funds from the Bitfinex platform and Bitfinex hasn’t incurred any losses.

The Block has reached out to 3AC for comment and will update this story should we hear back. 

Neither 3AC nor its founders Zhu and Davies are yet to issue a public statement on their situation. Several people told The Block that they’d tried to reach them in recent days, without success. 

Zhu tweeted earlier this week that “we are in the process of communicating with relevant parties and fully committed to working this out.”

With contributions from Frank Chaparro.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Episode 54 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro, Jack McDonald, chair & CEO of PolySign, and Matt Stover, CEO of MG Stover.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com

Back in April, digital asset infrastructure provider PolySign acquired top fund administration firm MG Stover as reported by CoinDesk. At the time of acquisition, MG Stover had more than $40 billion in digital assets under administration. 

This move coincided with PolySign completing its Series C fundraise, which included new powerhouse investors such as Soros Fund Management, Brevan Howard and GSR, along with former investors including Cowen Digital, who led PolySign’s $54 million Series B last year.

In this episode of The Scoop, Jack McDonald, chair and CEO of Polysign, and Matt Stover, CEO of MG Stover, sit down with host Frank Chaparro to record their first-ever podcast together, and to discuss the unwavering demand for digital asset-related products they are seeing from their clients.

As Stover explained, while crypto prices may be down, there is still plenty of private funding flowing toward building out digital asset infrastructure:

“We get to see both the liquid and illiquid on the investment side and there’s so much capital still flowing into the private companies building infrastructure around this new asset class.”

Although the recent market downturn has many market participants on edge, McDonald says the long-term view institutions from traditional finance have when it comes to digital assets make short-term market movements irrelevant.

As McDonald said during the interview:

“The long-term view that these traditional asset managers make in investing in this sort of way is really unaffected by the recent market downturns. They’re taking a long-term view and they’ve done the work to make these decisions.”

During this episode, Chaparro, McDonald, and Stover also discuss:

• Systematic risk in crypto
• The future of digital assets beyond cryptocurrency
• How emotions drive crypto booms and busts

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Cross River
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Cross River
Cross River is powering today’s most innovative crypto companies, with banking and payments solutions you can rely on, including fiat on/off ramp solutions. Whether you are a crypto exchange, NFT marketplace, or wallet, Cross River’s API-based, all-in-one platform enables banking as a service, ACH & wire transfers, push-to-card disbursements, real-time payments, and virtual accounts and subledgers. Request your fiat on/off ramp solution now at crossriver.com/crypto.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The valuation of Klarna Bank is set to plunge to $15 billion as the buy-now, pay-later (BNPL) player seeks a $500 million fund raise, according to a report from the Wall Street Journal.

This means that the company, known for a BNPL checkout option through which users are able to delay or split payments interest-free, would no longer be Europe’s most valuable fintech. Its new valuation would be more than $30 billion less than at this time last year, when it raised $639 million in a round led by SoftBank. 

Klarna’s current talks with investors are also a come-down from previous fundraising ambitions, when it reportedly was set to raise $1 billion at a $30 billion valuation.

News of the down-round comes amid an employee cull at the company as it suffers during an economic downturn where investors are less willing to make bets on unprofitable companies. Last month, The Block reported that Klarna would dismiss about 10% of its workforce, citing a potential recession, higher inflation and a shift in consumer sentiment. 

Klarna also faces increased competition in the sector, particularly from big technology companies. Earlier this month, Apple announced a foray into BNPL via Apple Pay. 

As The Block has reported, an increasing number of financial technology firms have carved out market share in BNPL services, buoyed by interest from venture capitalists. Some of these companies are also exploring crypto offers as part of bids to cater to younger customers.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Arthur Cheong, founder of DeFi and web3-focused venture capital firm DeFiance Capital, vowed that his company is “not done” after a week of ructions in crypto markets that has seen rumors swirl around the future of many prominent investors. 

“We are not done and is actually actively working to resolve the situation. My and our team behaviour and action is consistent and this will not change,” Cheong tweeted to his nearly 140,000 Twitter followers on Friday. “We are courageous adults,” he added in a second post shortly after.

It’s been a difficult week for crypto markets, with lending firm Celsius halting client withdrawals on its platform, bitcoin hitting an 18-month low below $21,000 and Tron’s Decentralized USD (USDD) stablecoin entering a fifth day unpegged from the dollar. 

Amid the tension, investors have been beset with speculation about which firms might face insolvency, including crypto hedge fund Three Arrows Capital. Three Arrows helped Cheong set up DeFinance Capital and DeFiance “operates as a sub-fund and share class of Three Arrows Capital,” according to its website.

Cheong’s mood appears to have bounced back from Wednesday, when he had posted a tweet consisting of a single crying face emoji. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Startup zCloak Network, which provides zero-knowledge proofs for public blockchains, raised $5.8 million in a pre-Series A round.

While there was no lead investor, Coinbase Ventures was a major participant, according to a news release. 

Participating investors included Bixin Ventures, Matrixport Ventures, DFG, Sancus Ventures, KuCoin Ventures, Sanctor Capital, Hash Global and Jump Capital among others. The valuation was not disclosed. 

The startup sees itself as a zero-knowledge proof-as-a-service company for public blockchains. Zero-knowledge proofs are a cryptographic method of authentication where one party can prove the truth of specific information to another party without disclosing additional information.

“Verifiable computation in user device will be a defining feature of Web 3.0. In contrast to the current paradigm of big data and cloud computing, zCloak enables users to perform computation and analysis of their data in their own device, not in centralized servers,” CEO Xiao Zhang said in the statement. 

With the zCloak product, users can prove that their identity has certain attributes without sharing private data for use in DeFi, identity and biometric applications. These proofs are made available in major public blockchains via its oracle service. 

With the new funds, the company plans to expand its partnerships with identity data attestors, web3 applications and blockchain networks. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Digital fashion collectibles startup SKNUPS has raised $3.5 million in pre-seed funding.

The contributions came from Redrice Ventures, Blue Wire Capital, and Adelpha.

The company also announced a deal with Dolce and Gabbana, which went live today on its website, to introduce their styles into online games.

SKNUPS, pronounced “skin-ups” was founded in 2020 but launched in stealth open-beta mode in December 2021. The brand has since collaborated with up-and-coming fashion designers, but the Dolce and Gabbana partnership is its first major brand collaboration.

Fashion brands have increasingly been playing with the concept of virtual stores, crypto payments, and NFTs. Earlier this week, Lacoste launched NFTs. Last week, Farfetch began accepting crypto payments.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Elon Musk advocated for integrating payments into Twitter more broadly, including support for cryptocurrencies, according to a transcript of a meeting with staffers held Thursday.

Per a leaked transcript published by Vox, Musk was asked about his thinking in this area. Musk replied by saying “[y]our money is essentially a form of information” and that digital payments have become increasingly ubiquitous in recent years. 

Musk went on to say:

“I think it would make sense to integrate payments into Twitter. So that it’s easy to send money back and forth. And if you have currency as well as crypto. Essentially, whenever somebody would find it useful. So the goal, my goal would be to maximize the usefulness of the service — the more useful it is, the better. And if one can use it to make convenient payments, that’s an increase in usefulness.”

Musk appeared to suggest a more direct payments integration than exists today. As previously reported, Twitter rolled out support for bitcoin tipping last fall and later added ether earlier this year for mobile users. 

In his remarks, Musk indicated that payments would form part of a broader strategy to keep people using the site.

“It sort of news, entertainment, and payments, I think, are like three critical areas. But really, it’s just about sort of thinking about how to make this, how to make using Twitter so compelling that you can’t live without it, and that everyone wants to use it,” he said.

The comments come amid a period of uncertainty over whether Musk’s bid to buy the social media giant will actually go through. Despite inking a deal with Twitter’s board this spring, Musk has since argued that he has the right to pull out of the deal. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin miners were largely down in the stock markets on Thursday.

Among the companies with the biggest losses were Digihost Technology (-12.70%), Cipher Mining (-11.18%) and Stronghold Digital Mining (-9.34% ).

Bitcoin miner CleanSpark announced that it had acquired 1,800 miners, taking advantage of the current beneficial market conditions. The company was up by +0.91% by the end of the trading session.

Bitcoin price was at around $20,500 at the time of publication — down by about 8.6%, according to TradingView.

Here’s how crypto mining companies performed on Thursday, June 16:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.