002α

Gm Ser/Milady,

Please take into consideration that one of the reasons why Shas and all alts belonging thereto, including XBT002 (“XBT002”) have sustained an impeccable reputation since 2011 is that for us as a tweetoooor, our compliance with shitposting laws and best practices and followers’ interests always come first. We are actively showing this through our constant, open and transparent communication with our followers, feds and the bagholding community as a whole.

You are currently engaged in malicious unfollowing, subtweeting and unfounded meanposting, and referring to and citing such spread by other persons, including anonymous femboy accounts, with the sole intention to hurt XBT002’s feelings. The above has been undoubtedly causing damages to our follower count, entitling us to seek full indemnity therefor.

As you are very well aware, it is against Twitter’s terms and conditions to make or refer to deliberate statements that intend to harm the reputation of an anon or pseudoanon without any factual evidence.

We, therefore, demand that you immediately, delete all your comments, statements, subtweets, retweets, substacks, in the social media websites and any other public media or communication channel, disparaging, defaming, or hurting XBT002’s feelings, goodwill and commercial interests, and cease and desist orally or in writing, through any form of communication, including but not limited to the social media websites and any other public media or communication channel, disparage, defame, or discredit XBT002… actually, we don’t know what the fuck these words even mean. ==Just delete your account.==

Please be informed that we always protect our rights and interests by all available legal means and our legal counsels in Shenandoah, PA are currently preparing an action to be immediately brought in court for all acts of unfollowing, subtweeting, meanposting, and other things we don’t like, as well as for full indemnity for the emotional damages suffered by us as a result of such actions and all other available legal remedies in this regard. In such a case, the defendants will also be liable to cover all costs and expenses (including gas fees) incurred by us in the court proceedings until the full satisfaction of our claims.

Please consider that filing a defamation claim will, among other things, result in uncovering the identity of all anonymous femboys and frogs, obtaining equitable relief, including but not limited to the removal of the relevant content, and obtaining damages for the harm caused to our reputation.

__Your failure to comply immediately with the above will undoubtedly result in absolutely nothing but please be afraid anyways.__

We hope that the dispute will be settled by you sending 10 ETH to 002a.eth immediately.

Lmeow,

XBT002, 0xMarnie and the rest of the 002a team


:::info
This 002a blog post is purely intended to be entertainment and satirical expression. All of the content and its originality is (or at least should be) protected under the Fair Use Exception of the Copyright Act and Free Speech principles incorporated in the First Amendment, because the author is ‘murican.

:::

\


NOTICE TO CEASE AND DESIST

The high-profile collapse of the Terra ecosystem and subsequent [collapse](https://paragraph.xyz/notes) of hedge fund Three Arrows Capital — together with troubles at Celsius and other CeFi lenders — have spread contagion throughout the wider crypto industry.

At the same time, coin and token prices have nuked massively from all-time highs alongside major Fed-fueled declines in traditional markets — causing widespread losses (both realized and unrealized).

Retail has — for the time being, at least — exited the game, and general risk-off attitudes are unlikely to bolster the crypto market in the near-term.

Crypto is once again in a bear market. Fear, uncertainty and doubt are pervasive. Both BTC and ETH have revisited prices below their last-cycle all-time highs. Entities and major players across the industry are seeing actual threats to their financial well-being.

The crypto industry may be experiencing its own over-leveraged financial crisis as customer confidence crumbles and questions are being asked about liquidity and solvency. Obviously, no government bailout is in the cards (though regulation may be) — leaving the industry’s largest players to try and stem the bleeding themselves.

==This article aims to serve as a comprehensive record and examination of proverbial bailouts across the crypto industry.==

## Voyager bailed out by Alameda Research

Voyager Digital Ltd. signed a non-binding term sheet with Alameda Research to secure both a cash/USDC-based credit facility for 200 million USD and a 15,000 BTC credit facility. Both credit facilities expire on Dec. 31, 2024 and carry a 5% annual interest rate.

* Voyager [blamed](https://www.prnewswire.com/news-releases/voyager-digital-signs-term-sheet-for-us200-million-and-15-000-btc-revolving-line-of-credit-with-alameda-research-301570656.html) "current crypto market conditions" and claimed the loan is meant to help it "better serve and protect its customers."

### Low risk, but haemorrhaging money?

Before the loan, rumors were [circulating](https://twitter.com/ASvanevik/status/1538230630026072064) concerning Voyager’s possible insolvency.

* Speculation exists that Voyager’s apparent financial issues stem from it [loaning](https://twitter.com/DylanLeClair_/status/1537506934563262466) Three Arrows Capital 320 million USD.
* Voyager has [claimed](https://twitter.com/investvoyager/status/1536709196619649024) that it does not engage in DeFi lending activities, algorithmic stablecoin staking/lending, derivative assets or stETH.
  * It has [referred](https://twitter.com/investvoyager/status/1536709199694024704) to its business practices as "low-risk" and and "straightforward."

## BlockFi bailed out by FTX

BlockFi signed a term sheet with FTX to secure a 250 million USD revolving credit facility.

* The announcement was made by the BlockFi’s CEO, Zac Prince, who [tweeted](https://twitter.com/BlockFiZac/status/1539216594383028224) that the loan provides the crypto platform "with access to capital that further bolsters out balance sheet and platform strength."
* FTX's CEO, Sam Bankman-Fried, [referred](https://twitter.com/SBF_FTX/status/1539268631095152642) to the deal as a capital injection in order to partner with BlockFi and help it "navigate the market from a position of strength."

### Too little, too late?

Some in the crypto industry believe the deal still doesn’t make BlockFi tenable.

* Supposedly leaked financials via @0xHamz [show](https://twitter.com/0xHamz/status/1539256060225146885) the crypto platform burning some 350 million USD in 2022 with negative gross profit.
* Not helping BlockFi’s near-term outlook is the belief that clients’ de-risking is [expected](https://twitter.com/lawmaster/status/1539256586870394889) to hit crypto lending platforms hard in the immediate future.

## Solend walks back whale-wallet takeover

After an approved proposal provided Solend Labs with "emergency powers" to take over a whale’s wallet in an attempt to avoid liquidation — a result of SOL’s price decrease — a subsequent proposal passed that invalidated the move.

* The takeover was originally attempted to prevent the decentralized lending platform from taking on bad debt and putting strain on the already-strained Solana network.
* Following the passing of governance proposal SLND3, a per-account borrow limit of $50M will be [imposed](https://twitter.com/solendprotocol/status/1539397862563295233) on Solend.

### Decentralized finance (when it’s convenient)

The whole situation with Solend has highlighted that some decentralized finance protocols are not very decentralized.

* Upgradable smart contracts in the DeFi space may be [problematic](https://twitter.com/scott_lew_is/status/1539084602979110913).

## CoinFLEX monetizing 47 million USD IOU

After an individual account went into negative equity and couldn’t be automatically liquidated, CoinFLEX [paused](https://coinflex.com/blog/coinflexs-solution-to-resume-withdrawls) user withdrawals. Subsequently, the individual in question apparently pledged "stringent personal guarantees around account equity and margin calls in exchange for not being liquidated."

Now, in an attempt to re-enable withdrawals, the self-professed "Home of Crypto Yield" is planning to monetize the individual’s "personal guarantee" by launching a Recovery Value USD token, or rvUSD. CoinFLEX claims there is "significant interest in the terms presented" from "potential large buyers."

* The maximum amount of rvUSD being [issued](https://cfv2-media.s3.ap-northeast-1.amazonaws.com/media/pdf/rvUSD_Whitepaper.pdf) is 47 million tokens — implying the problematic loan in question was for 47 million USD and not collateralized.
* CoinFLEX is offering a 20% APR paid daily in rvUSD — an interest rate with questionable sustainability.

## Celsius facing bankruptcy as Goldman Sachs looks to buy assets

Goldman Sachs is reportedly [trying](https://www.coindesk.com/business/2022/06/24/goldman-sachs-raising-funds-to-buy-celsius-assets-sources/) to raise 2 billion USD in an effort to buy distressed assets from Celsius after the crypto lender tapped restructuring [advisors](https://www.wsj.com/articles/celsius-network-taps-more-advisers-to-prepare-for-potential-bankruptcy-11656088078?mod=Searchresults_pos1&page=1) Alvarez & Marshal and restructuring [attorneys](https://www.wsj.com/articles/crypto-lender-celsius-hires-restructuring-lawyers-after-account-freeze-11655250575) from Akin Gump Strauss Hauer & Feld.

* Buying distressed Celsius assets would potentially provide investors with massive discounts on coins and tokens in the event of the latter’s bankruptcy — which seems increasingly likely.


:::info
This article is a work in progress and will be updated regularly as new and relevant information comes in.

:::

\


Bripto bailouts: Emergency Crypto Stabilization Act of 2022

Three Arrows Capital is a crypto hedge fund founded by high school friends Su Zhu and Kyle Davies — prominent figures in the crypto industry — in 2012.

Though its self-defined focus is on "providing superior risk-adjusted returns," the prominent entity has been — for lack of a better acronym — btfo as a result of massive declines in coin and token valuations, stETH trading at a discount, Terra’s high-profile implosion, the widening GBTC discount and its own dramatic over-leveraging in line with its apparent supercycle expectations.

==This article will continually examine the ongoing crisis with 3AC and its effects on the overall crypto industry, while also providing resources for readers to learn more.==

## Liquidations: is 100k ETH still dust?

Though Su Zhu has frequently [flexed](https://twitter.com/zhusu/status/1468166803192909824) its power and supposed financial strength on Twitter, Three Arrows Capital has reportedly failed to meet its obligations and answer margin calls with a variety of crypto platforms.

* 3AC’s positions on crypto exchanges FTX, Deribit and BitMEX have been [liquidated](https://www.theblock.co/post/152665/ftx-deribit-bitmex-liquidated-three-arrows-capital).
  * Though the hedge fund also owes BitMEX roughly six million USD in collateralised debt, the effect on the three exchanges’ overall health may be minimal. (Perhaps even negligible.)
    * CEO Sam Bankman-Fried [claims](https://twitter.com/SBF_FTX/status/1538230512304660480) FTX is unaffected.
* It is widely assumed that crypto lender BlockFi — which, earlier this year, [agreed](https://www.sec.gov/news/press-release/2022-26) to pay 100 million USD in penalties for failing to register its retail crypto lending product’s offers and sales with the United States Securities and Exchange Commission — also [liquidated](https://twitter.com/BlockFiZac/status/1537499455007645696) (or “hedged”) all of 3AC’s associated collateral after "a large client \[…\] failed to meet its obligations on an overcollateralized margin loan."
  * BlockFi has since agreed to a 250 USD revolving credit facility from FTX — a signal some [speculate](https://twitter.com/hodlKRYPTONITE/status/1541302530831163392) is indicative of its insolvency.
* It is also widely assumed that Genesis [liquidated](https://twitter.com/michaelmoro/status/1537822426536546306?s=21&t=2a6f74watdlWNtAHp9YKZw) 3AC after CEO Michael Moro tweeted that the institutional crypto trading, lending, derivatives, custody and prime brokerage company "mitigated our losses with a large counterparty who failed to meet a margin call to us earlier this week \[…\] We sold and/or hedged all of the liquid collateral on hand to minimize any downside.”
* 3AC has also liquidated all of the stETH in one of its wallets. After [dumping](https://etherscan.io/tx/0x7a98f23b1b587d55ccf498015bef65fdcafda99e7dca3d57fa69c5afb42dd640) 5500 stETH for nearly 6.1 million USDT one day prior, it has sold another 14,118 stETH for roughly 13.5 million USDT in a pair of transactions. \[[1](https://etherscan.io/tx/0x0ad108f6600f1562817aa69a5f0cc2cdf3976299469254ecc58c4007b21b7cc7), [2](https://etherscan.io/tx/0x56ee0d54827edfcbafea7c9be3d9048f0c02453367f20c2b0cd820bda0997f33)\]
* Questions are currently being [asked](https://twitter.com/JSeyff/status/1537886672515239938) regarding 3AC’s 38,888,888 GBTC shares.
* Voyager Digital LLC [issued](https://www.prnewswire.com/news-releases/voyager-digital-provides-market-update-301575492.html) a notice of default to 3AC for failing to make payments on a 15,250 BTC and 350 million USDC loan. It intends to seek recovery from 3AC.

### Long your longs

3AC reportedly [borrowed](https://twitter.com/WuBlockchain/status/1538085110981218304) heavily in early June — using stETH as collateral — without indicating its financial issues. The lenders seemingly did not conduct due diligence or accurately assess the risk involved with lending to 3AC.

As of the time of this writing, both Zhu and Davies have, more or less, [disappeared](https://www.vice.com/en/article/n7zw7x/founders-of-dollar10-billion-crypto-hedge-fund-have-ghosted-after-bets-go-bad) from public view while failing to respond to various business partners.

==The TL;DR is that 3AC owes a lot of money to a lot of people.==

## Contagion (crypto’s hottest buzzword)

Three Arrows Capital’s blowout has caused secondary problems — or, to use Crypto Twitter’s favorite buzzword, "contagion" — for a multitude of industry participants. These problems come through direct business or investment with 3AC, and/or the related decreases in crypto prices.

* Finblox — which advertises "up to 90% APY on your crypto" — has [imposed](https://twitter.com/finblox/status/1537414199890296838) 500 USD daily / 1500 USD monthly withdrawal limits for all users as a direct result of Three Arrows Capital’s investment.
* DeFiance Capital is believed by some to be struggling after its founder [tweeted](https://twitter.com/Arthur_0x/status/1537677544807272449) the venture fund is "actively working to resolve the situation." (They also tweeted: "We are courageous adults.")
* Cai Wensheng of Meitu and LongLing Capital are [selling](https://twitter.com/jiran_z/status/1537849649913946114?s=21&t=2a6f74watdlWNtAHp9YKZw) thousands of ETH coins after being [liquidated](https://twitter.com/Jiran_z/status/1536708936614547456) to the tune of nine figures.
* dYdX took the time to address speculation regarding 3AC’s investment. The crypto exchange [stated](https://dydx.exchange/blog/message-to-the-dydx-community-6-17-22) that its "liquidity and exchange operations have not been and will not be affected by current or future developments involving Three Arrows Capital."
* Crypto credit platform Nexo claims to have no exposure to 3AC after [denying](https://twitter.com/Nexo/status/1536957262970896385) it unsecured credit two years ago.
  * Nexo’s solvency has been called into question as the crypto lender [published](https://nexo.io/blog/notice-to-cease-and-desist) a cease and desist order on its own blog in reference to what it calls "malicious spreading of inaccurate, fake and unfounded information." It also [outlined](https://nexo.io/blog/the-anatomy-of-fake-news-the-latest-attack-on-nexo) a defense against some allegations being made.
* ~~Following speculation that~~ As a result of Voyager [loaning](https://twitter.com/DylanLeClair_/status/1537506934563262466) ~~320 million USD~~ 15,250 BTC and 350 million USDC to 3AC, the crypto platform [announced](https://www.prnewswire.com/news-releases/voyager-digital-signs-term-sheet-for-us200-million-and-15-000-btc-revolving-line-of-credit-with-alameda-research-301570656.html) that it "signed a non-binding term sheet with Alameda Research to secure a revolving line of credit providing Voyager with access to further capital." The credit comes in the form of cash/USDC-based credit facility and 15,000 BTC coins.
* Babel Finance [claims](https://www.theblock.co/post/153067/babel-finance-steps-crypto-liquidity-situation) to have "no business with Three Arrows Capital," despite suddenly suspending withdrawals alongside 3AC’s collapse. The crypto financial services firm has liquidity issues and has conducted an emergency assessment of its business. It is coming to agreements regarding the repayment of debts.
  * There exists speculation that Babel Finance will soon be bankrupt.
* Despite calling itself "The only DeFi trading and staking protocol with Single-Sided Liquidity & 100% Impermanent Loss Protection," Bancor paused its Impermanent Loss Protection — citing "hostile market conditions." The team didn’t explicitly blame Three Arrows Capital (and/or Celsius), but [wrote](https://blog.bancor.network/market-conditions-update-june-19-2022-e5b857b39336) in an official blog post:

  > These costs have been amplified by the recent insolvency of two large centralized entities who were key beneficiaries of BNT liquidity mining rewards as long-time LPs in Bancor V2.1. To cover their liabilities, these entities have rapidly liquidated their BNT positions and withdrawn large sums of liquidity from the system, while an unknown entity has opened a large short position on the BNT token on an external exchange.
  * Some believe that Bancor is both disingenuous and in deeper trouble than it is letting on — with its solvency called into question.
* CoinFLEX [paused](https://coinflex.com/blog/coinflexs-solution-to-resume-withdrawls) withdrawals on June 23, 2022 after "a long-time customer of CoinFLEX’s account went into negative equity." The self-professed "Home of Crypto Yield" was unable to auto-liquidate the position and "required the Individual to pledge stringent personal guarantees around account equity and margin calls in exchange for not being liquidated."
  * CoinFLEX now plans on launching a token called Recovery Value USD, or rvUSD, as a solution toward re-enabling withdrawals.
* BlockFi — as mentioned previously — may be facing insolvency after agreeing to a 250 million USD loan from FTX.
  * If BlockFi [struggled](https://twitter.com/hodlKRYPTONITE/status/1541302790060122112) to operate at a profit during a bull market, questions must be asked regarding its viability in a bear market.
* Crypto lender Celsius has reportedly been advised to file for bankruptcy as Goldman Sachs looks to raise funds in order to purchase its distressed assets.

==The TL;DR is that 3AC’s contagion is indeed high, with many entities directly impacted by its apparent insolvency. As a direct result, coin and token prices in the crypto market are currently in free-fall. Trust in lending platforms across the industry has also taken a hit.==

## Legal issues: the lawyers are coming

In an effort to save itself, Three Arrows Capital has [hired](https://www.wsj.com/articles/battered-crypto-hedge-fund-three-arrows-capital-considers-asset-sales-bailout-11655469932) advisers to help resolve its extensive legal and financial woes, while hoping to find a saviour in another firm and appease creditors.

* 3AC finds itself a defendant — alongside Terraform Labs (and Do Kwon and Nicholas Platias), Jump Crypto, Tribe Capital and others — in a class action compliant for allegedly [violating](https://www.docdroid.net/fAFxC9p/terra-lawsuit-pdf) of U.S. federal securities laws.

It is presumed that 3AC will face multiple legal battles in the months ahead.

## Conclusions: a trust-based failure in a supposedly trustless industry

Lessons will be learned from Three Arrows Capital’s high-profile implosion and industry-shaking fallout.

* One of the primary poisons being exposed in the current 3AC fallout is the irresponsible lending and poor risk management endemic among major crypto entities in the recent past — drawing comparisons to the 2007-2010 subprime mortgage crisis in traditional finance.
  * There are no government bailouts of too-big-to-fail crypto entities. Whereas we’ve seen TradFi failure forgiven — and, in some cases, rewarded — through The Emergency Economic Stabilization Act of 2008, it’s ultimately every man for himself in the crypto industry.
* Compound Finance founder Robert Leshner noted how the event highlights the need for decentralized finance, [tweeting](https://twitter.com/rleshner/status/1536928363276812289):

  > Watching the implosion of UST, Celsius, 3AC, and (hopefully not) more, all of which are opaque and trust-based, reaffirms the need for \*Decentralized Finance\* more than ever.
  * FTX CEO Sam Bankman-Fried similarly shared that the 3AC situation couldn’t have happened on a transparent on-chain protocol, [tweeting](https://twitter.com/SBF_FTX/status/1538451453030825984):

    > FWIW 3AC/etc. couldn't have happened with an on-chain protocol that was transparent
  * In fact, core DeFi protocols — Curve, Uniswap, Aave, Balancer, Sushi, etc. — worked as intended under what may be considered maximum stress.
  * Embattled CoinFLEX also acknowledged that CeFi is "vulnerable to a lack of transparency."
* Trust is rapidly decaying with in the crypto lending sphere. Most industry pundits are in agreement that now may be a good time to withdraw your funds. (Not your keys. Not your coins.)
* A premium may soon be placed on protocols [built](https://twitter.com/mewn21/status/1538737037037084673) with resilience against black swan events in mind — particularly due to the inherent volatility of the crypto industry and market.
* With 3AC blowing up shortly after Terra and alongside multitude of industry influencers, it has becoming abundantly clear that idol worship may best be avoided.
* Tether has proven resilient thus far, despite its CTO’s claims that it [experienced](https://twitter.com/paoloardoino/status/1541418821562601474) a coordinated attack on its liquidity. Paolo Ardoino [tweeted](https://twitter.com/paoloardoino/status/1541418832664973312):

  > In more than one month Tether processed 16B in redemptions (\~19% of our total reserves), again proving that our operations, portfolio, banking infrastructure and team are solid and battle tested. \[…\] Tether also reduced its commercial paper exposure from \~45B to \~8.4B and is set to phase it out in full in the coming months. All the expiring CP have been rolled into US Treasury bills, and we'll keep going till CP exposure will be 0.

==The TL;DR is, essentially, the old Bitcoin adage: “Don’t trust. Verify.”==

## Resources and further listening

The crypto industry’s focus is firmly on Three Arrows Capital’s crisis and its effects on the market. Here are some resources where you can learn more:

* Definalist is [tracking](https://definalist.notion.site/Three-Arrows-Capital-portfolio-5c971fb9d5bb4c23a3b1fd01d1709f9d) Three Arrows Capital’s portfolio via Notion.
* Mika Honkasalo [discussed](https://unchainedpodcast.com/why-possible-insolvencies-by-celsius-and-3ac-could-spell-disaster-for-crypto/) 3AC (and Celsius) in Unchained’s 364th episode, titled "Why Possible Insolvencies by Celsius and 3AC Could Spell Disaster for Crypto."
* Messari’s founder has [shared](https://twitter.com/twobitidiot/status/1538205503490252802) its last publicly available screener for 3AC.
* A Twitter account called @3AnonCompany purports to be anonymous counterparties that worked with Su Zhu and Kyle Davies in the past. It [claims](https://twitter.com/3AnonCompany/status/1537655034074189825) to be "spilling the beans."


:::info
This article is continually being updated as new information arrives and is filtered for relevancy.

:::

\


NOTICE TO CEASE AND DESIST

Bripto bailouts: Emergency Crypto Stabilization Act of 2022

Three Arrows C[r]apital: liquidations, contagion, legal issues, conclusions and resources