Key Takeaways
- KuCoin is rumored to be facing insolvency issues in the fallout from Three Arrows Capital’s collapse.
- The firm’s CEO has denied the claims, saying that “everything on KuCoin is operating well.”
- The development follows a wave of crypto firms halting customer withdrawals in response to extreme market conditions and the Three Arrows crisis.
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The rumors surfaced hours after Voyager Digital announced it was freezing customer withdrawals amid the ongoing Three Arrows Capital crisis.
KuCoin Operating as Normal, CEO Insists
Rumors that KuCoin could be on the brink of collapse are untrue, according to the firm’s CEO.
Be aware of FUDs!
Not sure who’s spreading these sheer rumors, and what their intentions are, but #KuCoin does not have any exposure to LUNA, 3AC, Babel, etc.
No “immense suffer” from any “coin collapse”, no plan to halt withdrawal, everything on KuCoin is operating well.
— Johnny_KuCoin (@lyu_johnny) July 2, 2022
Johnny Lyu addressed speculation that the firm could be facing insolvency in an early Saturday tweet storm, affirming that “everything on KuCoin is operating well” and the exchange had no plans to halt withdrawals. Lyu also described the circulating chatter about KuCoin’s possible liquidity issues as “sheer rumors” and confirmed that the firm has no exposure to the Terra ecosystem, Three Arrows Capital, or Babel Finance.
Rumors of KuCoin’s internal problems surfaced late Friday, hours after Voyager Digital became the domino to fall as part of crypto’s ongoing Three Arrows saga. Voyager announced Friday that it was halting customer withdrawals, deposits, and trading and “exploring strategic alternatives” for how the company could move forward. Last month, it was revealed that Three Arrows had defaulted on a loan of 15,250 Bitcoin and 350 million USDC worth around $665 million from Voyager. Three Arrows is yet to make the repayments.
KuCoin raised $150 million in a funding round in May, valuing the firm at $10 billion. As Lyu noted in his Saturday announcement, the firm is also actively hiring despite the ongoing market slump. Lyu added that “being transparent is always one of [KuCoin’s] key principles” and closed his post with a positive note: “Don’t FUD, BUIDL.”
The Three Arrows Crisis
Until the crisis began to unfold in early June, Three Arrows was one of crypto’s largest hedge funds holding more than $10 billion in assets under management at its peak. As the crypto market plummeted, it came to light that the firm was facing major liquidity issues as it had taken on leverage from crypto lenders without factoring for a significant downturn. The firm’s co-founder Kyle Davies said that it had lost $200 million on its Terra bet when LUNA crashed in May, and multiple crypto lenders have since revealed that they had exposure to the firm. BlockFi loaned Three Arrows an undisclosed sum and has since inked a deal to be acquired by FTX.US for up to $240 million with an additional $400 million rolling credit facility. Babel Finance, CoinFLEX, and Celsius also responded to the market downturn by halting withdrawals, though none of them confirmed that they had Three Arrows exposure. On Friday, the troubled hedge fund filed for Chapter 15 bankruptcy in New York.
Though the full scale of the Three Arrows crisis remains unknown, several firms have been hard hit so far, and the market hasn’t shown much sign of life in the fallout. Bitcoin tumbled again Saturday after a week of rocky price action. It’s currently trading at $19,260, about 72.1% down from its $69,000 peak.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
