Three Arrows Capital

What happened

Three Arrows Capital was a Singapore-based hedge fund that had become one of the largest borrowers in crypto, funding leveraged positions with loans from centralised lending desks. It held a substantial position in Terra's ecosystem, which lost effectively all of its value in May 2022, and it was exposed to other trades that moved against it as prices fell. When lenders issued margin calls in June 2022 the fund could not meet them. A court in the British Virgin Islands ordered its liquidation at the end of that month, and the liquidators sought recognition in the United States shortly after. The default did not stop at the fund: several of the lending platforms that had extended it credit disclosed losses, and some of them subsequently entered bankruptcy themselves. Singapore's regulator later issued prohibition orders against its founders.

What to take from it

Contagion in crypto is not mystical; it is a lending chain. A platform offering you a yield is lending your deposit to somebody, and the concentration of its loan book is the risk you are actually taking. That book is rarely published, so the question worth asking of any yield product is who the borrower is and what happens to your money if that borrower defaults.

Dates and figures are widely reported public estimates from coverage at the time, not KripZen's own audited data.