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Celsius under investigation by state regulators, Three Arrows Capital's unexploded bomb: What assets are awaiting unlocking?

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Celsius under investigation by state regulators, Three Arrows Capital

Three Arrows Capital, 3AC, and Celsius Network have yet to release specific explanations to the public, leaving observers to speculate on the latest developments through apparent on-chain activities and information from anonymous sources. Celsius appears to be facing regulatory scrutiny, while 3AC continues to cash out. Although The Financial Times reported that it has been liquidated by lending platform BlockFi, this should be part of the previously rumored four hundred million USD institutional liquidation.

3AC Liquidation

According to sources cited by the Financial Times, 3AC faced liquidation by multiple institutions due to its failure to replenish collateral, similar to The Block's earlier report of a $400 million liquidation of 3AC. The Financial Times referenced lending platform BlockFi, with its risk lead Yuri Mushkin stating:

BlockFi can confirm that we recently made a business decision on a large account that was not meeting its obligations, believing that BlockFi was one of the first institutions to take action against that account. BlockFi has always held collateral well in excess of its loan book, and our cautious yet proactive risk management has enabled us to expand our user base and maintain business continuity during periods of market stress.

The latest developments related to 3AC include:

  • Earning platform Finblox has halted reward distribution, citing 3AC as both an investor and borrower on the platform.
  • 5,156 ETH was exchanged for 6.09 million USDT via Matcha, with the address marked as Nansen (source).
  • 7,118 ETH was exchanged for 6.86 million USDT with the address marked as PeckShield (source).
  • Fatman: Previously held a six-figure UST and deposited it in Anchor, recently sold USDD resulting in a slight detachment.
  • Deribit: 3AC has been a shareholder since February 2020, and regardless of the developments, Deribit's finances and operations remain unaffected.

Community Feedback

Miles Deutscher

DeFi investor Miles Deutscher advises caution to users holding assets invested by 3AC, as they are likely to be sold for cash as soon as the unlocking period ends.

The DeFi Edge TDE

TDE compiled analysis of 3AC over the past few days on Twitter, with most information already reported by various media outlets. They expressed:

We still cannot grasp the full extent of 3AC's wallet and pool situation, but given its scale, it is likely to lead to catastrophic consequences. VCs are not gods, and there is a bias towards them. Many believe Terra is too big to fail because companies like Jump and 3AC will come to the rescue, but they did not. Risk management has been underestimated. Do not try to fight the Fed; leverage is very dangerous.

Celsius Network

Information from Celsius is more reliable, as CNBC cites Joseph Rotunda, the enforcement chief of the Texas securities regulator, stating that securities regulators in Alabama, Washington, New Jersey, and Kentucky are investigating the freeze of Celsius accounts and have prioritized this investigation.

Joseph Borg, director of the Alabama Securities Commission, noted that Celsius continues to respond to regulatory inquiries, but the investigation is still in its early stages. The U.S. SEC has been in communication with Celsius, but declined to comment.

Ironically, Celsius previously used "Unbank Yourself" as a slogan, urging users to break free from banks. However, sources cited by The Block reveal that Celsius has hired Citigroup as an advisor to provide recommendations on potential solutions.