three arrows capital a cryptofocused hedge fund has to meet a deadline on monday to repay more than 670 million in loans or face default in a case that could have a ripple effect across the digital asset market 3ac as its also known is one of the most prominent crypto hedge funds around and is known for its highly leveraged bets but with billions of dollars being wiped off the digital coin market in recent weeks the hedge fund is facing a potential liquidity and solvency issue voyager digital a digital asset brokerage said last week that it had lent 3ac 15250 bitcoins and 350 million of the stablecoin usdc at mondays prices the total loan equates to more than 675 million voyager gave three arrows capital until june 24 to repay 25 million usdc and the entire outstanding loan by june 27 monday neither of these amounts has been repaid voyager said last week adding that it may issue a notice of default if 3ac does not pay the money back voyager said that it intends to pursue recovery from 3ac and is talking to its advisors regarding legal remedies available voyager digital and three arrows capital were not immediately available for comment when contacted by cnbc how did 3ac get here three arrows capital was established in 2012 by zhu su and kyle davies zhu is known for his incredibly bullish view of bitcoin he said last year the worlds largest cryptocurrency could be worth 25 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 the onset of a new socalled crypto winter has hurt digital currency projects and companies across the board three arrow capitals problems appeared to begin earlier this month after zhu tweeted a rather cryptic message that the company is in the process of communicating with relevant parties and is fully committed to working this out there was no followup about what the specific issues were but the financial times reported after the tweet that usbased crypto lenders blockfi and genesis liquidated some of 3acs positions citing people familiar with the matter 3ac had borrowed from blockfi but was unable to meet the margin call a margin call is a situation in which an investor has to commit more funds to avoid losses on a trade made with borrowed cash then the socalled algorithmic stablecoin terrausd and its sister token luna collapsed 3ac had exposure to luna and suffered losses the terraluna situation caught us very much off guard 3ac cofounder davies told the wall street journal in an interview earlier this month three arrows capital is still facing a credit crunch exacerbated by the continued pressure on cryptocurrency prices bitcoin hovered around the 21000 level on monday and is down about 53 this year meanwhile the us federal reserve has signaled further interest rate hikes in a bid to control rampant inflation which has taken the steam out of riskier assets 3ac which is one of the biggest cryptofocused hedge funds has borrowed large sums of money from various companies and invested across a number of different digital asset projects that has sparked fears of further contagion across the industry the issue is that the value of their 3acs assets as well has declined massively with the market so all in all not good signs vijay ayyar vice president of corporate development and international at crypto exchange luno told cnbc whats to be seen is whether there are any large remaining players that had exposure to them which could cause further contagion already a number of crypto firms are facing liquidity crises because of the market slump this month lending firm celsius which promised users super high yields for depositing their digital currency paused withdrawals for customers citing extreme market conditions another crypto lender babel finance said this month that it is facing unusual liquidity pressures and halted withdrawals