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Sector ‘at a transparency tipping point’ over disclosures as billions pour in

When Brookfield Asset Management announced it had raised a $15bn climate-focused impact fund last month, it was touted as the world’s biggest such vehicle for private assets focused on tackling the global climate transition.

Financing of this kind will be essential to achieving the 2015 Paris Agreement goals of limiting global warming, according to Mark Carney, Brookfield’s vice chair and former governor of the Bank of England.

“As the largest fund in the space by some measure we think we are going to define it,” Carney, a vocal advocate of the financial risks of climate change, told the Financial Times. “What is clear is the expectation from our investors and ourselves that when the fund gets to maturity all the assets and the fund as a whole has to be Paris aligned.”

But for outsiders, assessing whether the fund — which will invest in unlisted companies from those already possessing green credentials to others looking to finance a transition to more sustainable practices — is aligned may be difficult.

Although its managers say investors will be provided with full and regular reporting and data on its impact targets, Brookfield declined to share information on its impact goals and measurement systems, which will show whether it is on track to meet them, with the FT.

This does not make Brookfield an outlier. Some 42 per cent of global private capital — or $4.73tn — is now managed in funds that claim to be run according to sustainable investment principles, according to a survey by data provider Preqin.

Yet data and disclosure on environmental, social and governance (ESG) metrics are even less transparent and standardised in private markets than in public ones — which have recently faced a barrage of allegations of greenwashing.

Many privately held companies are smaller to midsized, or more recently established, making them less likely to have been subject to the same scrutiny for as long as their listed peers.

This opacity makes it difficult to judge who is integrating ESG principles seriously, an issue that has rocked fund managers in recent months as authorities on both sides of the Atlantic crack down on inflated sustainability claims.

“It’s absolutely true that judging ESG integration in private markets is harder than in public ones,” said Arjun Raghavan, chief executive of Partners Capital, an outsourced investment firm with more than $48bn under management, who pointed to the lack of public data and the difficulty of assessing sustainability at smaller private companies.

Whereas in public markets there is a deluge of reporting and firms such as Sustainalytics and MSCI provide some standardised metrics, there are no equivalent systems for private investments yet.

US and European regulators are looking to tighten reporting standards and crack down on greenwashing, though much of the focus has been on public investments so far.

“I think there’s definitely a risk of [mis-selling] on the private side. So many private equity investors put in place a PDF document that describes an official policy that gathers dust between fundraising cycles,” Raghavan said.

Scrutiny across the industry in general is rising. Fund manager DWS and its parent Deutsche Bank were raided by German federal police at the end of May as part of a probe into greenwashing, while around the same time BNY Mellon’s fund management arm agreed to pay $1.5mn to settle charges from the US Securities and Exchange Commission that it allegedly misstated and omitted information about ESG considerations for mutual funds that it managed. Goldman Sachs is also being probed by the SEC over its sustainability claims, and experts believe others are also being queried behind the scenes.

“Private markets are at a transparency tipping point. High-quality and reliable ESG data is essential to move from vision to reality,” said Jaclyn Bouchard, head of ESG solutions and corporate responsibility at Preqin. “It’s self-reported but isn’t that all of ESG? . . . Though it’s true there’s still a lot less info [on the private side].”

For Raghavan at Partners Capital, assessing sustainability credibility for private investments largely falls to in-house processes, including asking managers to fill out surveys and provide case studies. He notes that “the crème de la crème of private investors take it very seriously”, providing information through reporting mechanisms like the UN Principles for Responsible Investment (UNPRI) due diligence questionnaires.

Larger managers, and especially those in Europe, consistently have the best information and spend the most time on it, he added. However, in the US, especially for smaller companies being invested in, “it’s just a lot lighter”, he notes.

Pressure from investors is the biggest factor pushing ESG uptake across private assets, according to Preqin’s survey of more than 350 groups. Increased interest in sustainable and private investing have risen in tandem as investors chase diversification and higher returns.

For fund managers, the lack of clear best practices lies at the root of some of the confusion.

“I genuinely don’t believe anybody sets out to write a sustainability report to intentionally mislead . . . but at some point we have to say: this is what good looks like in order to drive consistency. It’s never going to be cookie cutter,” said Liz O’Leary, head of agriculture and natural assets at Macquarie Asset Management, pointing to the current “cacophony” of standards and metrics. 

There is an expectation that influential or mandatory ESG disclosure frameworks aimed at public investments, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR), will begin to filter through to private investments.

However, more specific requirements for private and alternative managers are also being developed. The US Securities and Exchange Commission proposed new amendments to rules governing disclosures by managers, including in private and alternative funds, at the end of May,

Elsewhere, the Task Force on Climate-related Financial Disclosures (TFCD) is developing recommendations on disclosure standards that are expected to become mandatory for UNPRI signatories from 2024-2025.

“Investors really expect us to be in there leading this change. You’re running these businesses, you have no excuse. I think it’s good actually that we don’t have an alibi,” added O’Leary.

This is a monthly feature that runs down the month’s top 10 funding rounds in the U.S.

There’s been a lot of talk about the slowing pace of venture capital. While the stats seem to indicate this year will not be like the record-shattering fundraising numbers put up last year, June still seems to show some strength—albeit anecdotally. Five VC-backed U.S. startups raised rounds of a quarter-billion dollars or more, and investors spread their money across a vast array of sectors from space travel to AI to farming. In fact, the only sector to see two startups in the top 10 was biotech.

Let’s review the biggest deals of June. We’ll start with a man who can’t stay out of the news:

1. SpaceX, $1.7B, space travel: Elon Musk was in the news a lot in June. If it wasn’t for the neverending drama surrounding his potential Twitter purchase, it was for Tesla reportedly laying off employees. In between, his “other company”—SpaceX—raised $1.68 billion, although the Hawthorne, California-based company apparently was looking to raise $1.725 billion. News broke in May the company was looking to raise at least $1.5 billion—according to The Wall Street Journal. SpaceX has now raised around $9.5 billion, according to Crunchbase data.

2. National Resilience, $625M, biotech: While most people know of SpaceX, San Diego-based National Resilience may be a little more under the radar. However, the biotech company has now raised two rounds of $600 million or more in about 10 months. Resilience, an end-to-end biopharmaceutical manufacturing and development firm, raised a $625 million Series D in June after closing a previously unannounced $600 million Series C last August. The company develops therapeutics in its 10 facilities across North America. Although it did not announce who specifically participated in the round, it said it included “venture capital funds, public mutual funds, pension funds, biopharma companies, sovereign wealth funds and private family offices, among others.” The company says it has now raised more than $2 billion in equity since being founded in 2020.

3. Electrify America, $450M, electric vehicle charging: With the current prices at the pump, it’s no surprise a provider of fast electric vehicle recharging made this list. Reston, Virginia-based Electrify America raised a $450 million equity investment at a post-money valuation of $2.45 billion. Siemens, through its financing arm Siemens Financial Services, invested a “low triple-digit million” dollar amount in the round and became a minority stakeholder. In addition, the Volkswagen Group said it will increase its original capital investment of $2 billion through 2026 in Electrify America. The company has big goals, expecting to expand to 1,800 charging stations and more than 10,000 ultra-fast chargers in the U.S. and Canada by 2026.

4. Wonder, $350M, food delivery: Marc Lore’s food delivery startup Wonder gets the fourth spot this month after The Wall Street Journal reported that the New York-based startup raised a $350 million round led by Bain Capital Ventures at a $3.5 billion valuation. Wonder operates a network of food trucks from which consumers can order through a mobile app. The truck then drives near the customer’s home and prepares the food fresh. Lore knows retail as he previously served as CEO of retail giant Walmart’s e-commerce division.

5. Little Leaf Farms, $300M, farming: Agtech is having a moment with investors right now, and Devens, Massachusetts-based Little Leaf Farms is the latest in the space to see some significant funding. The company closed a $300 million equity financing led by TPG’s The Rise Fund. The startup expects to open its fourth hydroponic greenhouse—helping to make its lettuces accessible to more than half of the country’s population by 2026. Its lettuce is grown under glass and uses up to 90% less water than field-grown greens, according to the company. Founded in 2015, the company has now raised $435 million, according to Crunchbase data.

6. AlphaSense, $225M, artificial intelligence: Searching on the internet can be hard. AlphaSense is trying to make it better—at least when it comes to searching for structured and unstructured market analysis and business intelligence. The New York-based company raised a $225 million round led by Goldman Sachs Asset Management and Viking Global, valuing the company at $1.7 billion. That is nearly double the company’s value after its $180 million Series C in September. The $225 million number includes a “substantial debt investment from funds and/or accounts managed by BlackRock,” the company said in a release. Founded in 2011, AlphaSense has raised $520 million, according to Crunchbase.

7. Knock, $220M, fintech: The New York-based home-buying app closed a $220 million round led by the Foundry Group in June. Knock’s app lets people move fast to buy a home—allowing existing homeowners to get the cash they need before they even sell their current home. Founded in 2015, Knock has now raised a total of $900 million of debt and equity, according to the company.

8. Upstream Bio, $200M, biotech: Waltham, Massachusetts-based Upstream Bio locked up a $200 million Series A led jointly by OrbiMed and Maruho to continue its development of therapeutics for allergic and inflammatory diseases. The biotech company—the second on this list—is developing an antibody that could be useful to those with asthma.

9. Electric Hydrogen, $198M, cleantech: While venture funding may have slowed this year, investors seem keenly interested in cleantech startups that can help companies cut emissions. This month, Boston-based Electric Hydrogen closed a $198 million Series B—a mix of equity and venture debt—led by Fifth Wall Climate Tech. The round also consisted of an impressive list of strategic investors such as Amazon’s Climate Pledge Fund, Honeywell and Mitsubishi Heavy Industries. Electric Hydrogen has created its own patented approach to electrolysis—the process of producing hydrogen from electricity and water—designed for industrial applications. The cleantech and clean energy sectors saw a record $10.1 billion invested in VC-backed startups last year, and $5.5 billion already has come into the market this year, according to Crunchbase data.

10. Guild Education, $175M, edtech: Denver-based upskilling platform Guild raised $175 million in a Series F funding round led by Wellington Management that values the company at $4.4 billion. Even Oprah Winfrey invested. The company helps upskill frontline workers—something that has become popular as teaching current employees new skills can be lucrative to the employee and cheaper than recruiting for the employer. Founded in 2015, the company has raised more than $553 million, according to Crunchbase data.

Three of the five largest rounds globally in June went to startups outside the U.S.

Losses are blowing holes in balance sheets and pushing firms in the industry to near bankruptcy

Turmoil in the digital-assets ecosystem has grown in recent weeks, with losses in cryptocurrencies blowing holes in balance sheets and pushing firms near bankruptcy.

After a pair of cryptocurrencies crashed, wiping out billions of dollars in value in May, a British Virgin Islands court this past week ordered a hedge fund that had survived several crypto downturns to liquidate. Another platform that counts the hedge fund as an investor capped withdrawals while evaluating how the hedge fund’s woes would affect its liquidity.

A handful of crypto players have established financial ties throughout the market and added to risk by borrowing and lending digital assets among themselves, with at least one lender, Celsius Network LLC, drawing on collateral to do its own borrowing.

“Everything is deeply, deeply intertwined; we didn’t have this in 2018,” said Chris Bendiksen, head of research at the London-based asset-management firm CoinShares, CS 1.32%▲ referring to a past crypto market downturn.

While new to crypto, such problems are well-known in the traditional financial realm. During the 2007-08 global financial crisis, bank-lending practices including rehypothecation of assets—using collateral to borrow more money—left banks short on liquidity. In the aftermath, regulators tightened oversight.

Digital asset prices have been falling dramatically along with other speculative bets in response to the Federal Reserve’s move to raise interest rates. Crypto’s headache intensified in May, when the stablecoin TerraUSD broke from its dollar peg and dragged the value of its sister cryptocurrency Luna down with it, eradicating $40 billion.

Investors got a taste of how the commingling of crypto investments would hit the market when a fire sale of assets backing the TerraUSD stablecoin pushed the price of bitcoin almost $10,000 lower to trade around $30,000.

Problems facing Three Arrows Capital Ltd., the hedge fund ordered to liquidate after being heavily invested in Luna, spilled over to the crypto brokerage Voyager Digital Ltd. this past week. On Friday, Voyager said it was temporarily suspending trading, deposits, withdrawals and loyalty rewards. It earlier issued a notice of default to Three Arrows for allegedly failing to make a loan repayment of 15,250 bitcoin and $350 million in USD Coin, a stablecoin. The loan is worth about $646 million based on bitcoin’s current price of around $19,400. Shares of Voyager, which are traded on the Toronto Stock Exchange, are down more than 96% this year. On Friday, Three Arrows’ liquidators asked a New York bankruptcy court to recognize the British Virgin Islands case and to allow them to handle any assets in the U.S.

Three Arrows’ financial troubles have affected the smaller firms in its orbit. The Hong Kong-based trading firm 8 Blocks Capital said Three Arrows has cut off communications after allegedly misappropriating $1 million of its capital. Kyber Network, a decentralized-finance project, said the firm has “a small portion of its Treasury” with the hedge fund, which it said hasn’t responded to any of its attempts to communicate.

Three Arrows didn’t respond to a request for comment.

Crypto still exists largely outside of regulation, with few federal laws specific to crypto and the Securities and Exchange Commission taking up cases against individual firms on an ad hoc basis. The growth of the industry—worth more than $3 trillion at its peak last year—has surpassed the ability of regulators to keep up, according to analysts. The blowup of TerraUSD prompted renewed calls for Congress to pass legislation covering crypto.

Without a central bank to swallow illiquid assets and curtail contagion, crypto has taken a page from the traditional financial playbook. The crypto exchange FTX, headed by Sam Bankman-Fried, has struck a deal with the crypto lender BlockFi Inc. including a $400 million credit facility and the option for FTX to buy the company for as much as $240 million. BlockFi Chief Executive Zac Prince said by Twitter on Friday that market events related to Celsius and Three Arrows had a negative impact on the company.

BlockFi said it experienced about $80 million in losses from its loan exposure to the hedge fund.

In June, Mr. Bankman-Fried’s other crypto company, the trading firm Alameda Research, extended two credit lines, one worth $200 million and another for 15,000 bitcoins, to Voyager. Alameda acquired a $35 million stake in Voyager in May.

The travails of the crypto market call to mind the actions of a pair of financiers during prior times of turmoil. J.P. Morgan twice stepped in to prevent economic collapse before the Federal Reserve system was created in 1913. More recently, in 2008, Warren Buffett helped to revive Goldman Sachs Group Inc. and General Electric Co.

The crypto market’s problems could be the tip of the iceberg. Three Arrows, a big borrower in the system, has seen its levered positions liquidated by exchanges including BitMEX and Deribit after failing to meet margin calls. Margin calls, which are demands from lenders for more collateral from borrowers to back their loans, have swept across the crypto trading industry as the value of major cryptocurrencies fell in the midst of a broad market selloff.

The crypto investor Mike Novogratz, who bet heavily on Luna before its spiral, drew parallels between the current leverage-fueled carnage in crypto and the 1998 blowup of Long-Term Capital Management, a heavily leveraged hedge fund whose collapse sparked concern of contagion in the financial system.

The ascent of leverage in crypto has been growing for years, bursting with the downfall of TerraUSD and a pseudo crypto bank tied to it that offered holders of the stablecoin nearly 20% for putting their deposits in, said Caitlin Long, chief executive of Custodia Bank, which aims to provide custody and other digital asset banking services for institutional investors.

Crypto firms began taking on more leverage after the approval of Grayscale Bitcoin Trust in 2013. The trust for years was one of the few bitcoin investments that average investors could access in brokerage or retirement accounts. Because of that, its value often traded many times higher than that of spot bitcoin, letting investors profit from the difference. Three Arrows held 6.1% of the trust’s shares at the end of 2020, according to a filing with the SEC.

That trade was so successful that investors viewed it as risk-free, Ms. Long said. When it became less profitable as more products became available, investors began trading in bitcoin-futures markets, speculating that the price would go higher yet. And when that dried up, they turned to yield-generating platforms.

“All this leverage flocked from the sure thing to the less sure thing,” Ms. Long said. “With each one of these big trends it got riskier for traders to play them.”

Crypto investors are bracing for more pain yet. Celsius froze client accounts in June, and the crypto lender Babel Finance and the futures exchange CoinFLEX halted customer withdrawals. Babel Finance said it has reached preliminary agreements on the repayment period of some debts, but it hasn’t resumed withdrawals. CoinFLEX is issuing $47 million of another token in the hope of resuming customer withdrawals after a major customer went into “negative equity.”

Faced with uncertainty, some crypto lenders have begun recalling loans to large borrowers to check for their financial health, while others have tightened access to their loan products.

“There is a shortage of supply as companies like Celsius have now turned off withdrawals and have a smaller amount of assets to lend out,” said Adam Reeds, chief executive of the crypto lender Ledn. “Many market makers who used to borrow from platforms like that are now looking at alternatives.”

For now, executives in the industry are hoping the current crisis is a repeat of the “crypto winter” in 2018, during which the bad actors who orchestrated the boom and bust of initial coin offerings were flushed out, making the system stronger as a result.

“Just like we the industry flushed out all the ICO froth in the previous bull market, in this one it’s all the leverage being flushed out,” Ms. Long said.

A string of record quarterly deliveries came to an end in the second quarter, when Tesla handed over 254,695 vehicles to customers

Tesla Inc. TSLA 1.24%▲ vehicle deliveries fell quarter-over-quarter for the first time in more than two years, reflecting an extended shutdown in China, supply-chain disruptions and challenges associated with opening two new factories.

Elon Musk’s electric-vehicle maker said Saturday that it had delivered 254,695 vehicles to customers in the three months ended in June, down from 310,048 in the prior quarter. Deliveries were up roughly 27% from last year’s second quarter, when Tesla handed over 201,304 vehicles.

Analysts surveyed by FactSet forecast that Tesla would deliver around 264,000 vehicles in the second quarter. Many analysts in recent weeks had lowered their expectations after the company had to temporarily shut down its largest factory, in Shanghai, because of local Covid-19 restrictions. Tesla also has had trouble getting its new factories in Germany and Texas up to speed, Mr. Musk has said, calling the plants “gigantic money furnaces.”

The company produced 258,580 vehicles in the second quarter, down from 305,407 in the first quarter and up from 206,421 in last year’s second quarter. “June 2022 was the highest vehicle-production month in Tesla’s history,” the company said.

As recently as April, Mr. Musk had been sanguine about Tesla’s outlook, saying the company likely would produce more than 1.5 million vehicles in 2022, up some 60% over last year. Wall Street now believes Tesla could struggle to hit 1.4 million.

The decline in deliveries, which include cars that Tesla has sold or leased out, is poised to weigh on the company’s second-quarter earnings, scheduled for July 20. Analysts expect Tesla in a few weeks to report roughly $2 billion in quarterly profit, up from around $1.1 billion during the year-earlier period but down from its $3.3 billion record in the first quarter.

The auto maker’s bottom line is likely to be dented by a roughly $475 million bitcoin-related impairment, according to Credit Suisse. Tesla bought $1.5 billion worth of bitcoin in early 2021, when the cryptocurrency was trading above $28,000. The price of bitcoin fell below $17,700 in mid-June, according to CoinDesk. The company’s disclosed accounting methodology factors in the lowest market price of bitcoin since the asset was acquired.

Tesla shares lost more than a third of their value in the first six months of 2022. On April 26, the stock dropped more than 12%, its biggest one-day retreat in more than a year after Twitter Inc. TWTR 2.25%▲ accepted Mr. Musk’s $44 billion bid to take over the social-media company. Mr. Musk initially said he would rely on a bank loan backed by some of his Tesla shares to finance the deal. The following month, he adjusted his financing plan to include more equity instead.

Mr. Musk himself recently took a notedly multiday pause from posting on Twitter, where he often opines on Tesla and other matters. He returned to posting on the platform Friday.

Tesla delivered roughly 238,533 Model 3 sedans and Model Y compact sport-utility vehicles combined during the second quarter, up from 199,409 of those models a year earlier. It delivered 16,162 of its higher-end models—Model S sedans and Model X sport-utility vehicles—up from 1,895 during last year’s second quarter.

The company, like many rivals, has been increasing prices for its cars as it faces higher supply costs. U.S. customers who ordered the long-range version of Tesla’s Model Y compact sport-utility vehicle in late June could expect to pay roughly $68,000, or around $14,000 more than they would have if they ordered the model a year earlier, according to Bernstein Research.

Though consumer demand has held strong—buyers often face monthslong waits for new Teslas—Mr. Musk has expressed growing concern about the global economy. Tesla has let go hundreds of employees in recent weeks, part of cuts that Mr. Musk has indicated could touch 10% of the company’s salaried workforce.

The company, he said in an email to employees last month, had “become overstaffed in many areas.” He has since delivered mixed messages about how those cuts would affect Tesla’s overall staffing level. Tesla is also dealing with other labor issues, including a new lawsuit filed Thursday in California state court by current and former employees alleging racial harassment and discrimination. The company didn’t respond to a request for comment about the case.

Supply-chain disruptions and their ripple effects have caused many auto makers to operate less efficiently, according to consulting firm AlixPartners LLP. As of the fourth quarter, auto makers in the U.S. employed 29 people for every thousand vehicles they produced in 2021, up around 31% from a year earlier, the firm said.

For all of its recent disruptions, Tesla is likely to be the only major auto maker to increase U.S. sales in the first half of the year, from a year earlier, according to research firm Cox Automotive. Overall, sales of new vehicles in the U.S. during the first six months of 2022 were expected to have fallen about 17% from a year earlier, the firm said.

General Motors Co. GM 1.35%▲ said Friday that it built about 95,000 vehicles without certain parts and had to set the cars aside instead of shipping them to dealers. Its U.S. sales for the first half of the year were down nearly 18%.

Tesla’s in-house software engineering expertise made it more adept than many rivals at adjusting to a global shortfall of semiconductors. That know-how, paired with battery expertise, is likely to benefit the company as a global shift toward electric vehicles strains supply chains, UBS analysts said in a recent note.

“Tesla’s supply chain is structurally superior vs. peers in the mission-critical areas of semiconductors, battery cells and battery raw materials,” the analysts wrote last month. “Tesla is likely to keep all competitors at a stable or even growing distance in terms of absolute growth and profitability.”

Collapsed investment firm expected to face claims from ‘significant number of creditors’, court documents show

Three Arrows Capital has filed for bankruptcy in the US, highlighting the scale and reach of the prominent crypto investment firm’s borrowings across the industry before it collapsed into liquidation this week.

The Chapter 15 bankruptcy filing in Manhattan federal court late on Friday came just days after Three Arrows was pushed into liquidation in the British Virgin Islands, following claims that it failed to pay $80mn it owed to digital asset exchange Deribit. The US bankruptcy petition was made to empower attorneys appointed to lead the unwinding of Three Arrows in the British Virgin Islands, the Singapore-based fund’s legal domicile, to shield its US assets.

The failure of Three Arrows, which used borrowing to turbocharge its bets on cryptocurrencies, is the latest sign of how this year’s turmoil in digital asset markets has severely wrongfooted some of the industry’s biggest players. It also highlights how trouble at one firm can ricochet across the sector due to opaque links between investors, crypto exchanges and lending firms.

Insolvency specialists at Teneo, the advisory firm appointed in the British Virgin Islands to liquidate Three Arrows, told the US court that a “significant number of creditors” are expected to make claims against the hedge fund.

Deribit, a derivatives focused crypto trading platform, had kicked off the liquidation proceedings in the British Virgin Islands last week, with Three Arrows later agreeing to place itself into liquidation. However, Three Arrows is also in arbitration in New York with one of its biggest creditors, Russell Crumpler, one of the firm’s liquidators, said in a US court filing.

“With many creditors seeking to enforce their rights to collect on the debtor’s outstanding debt obligations, the risk increased that the debtor would dissipate it assets without consideration of each individual lender’s ability to recoup its losses,” Crumpler said.

In a sign of the scale of Three Arrows’s borrowings, Toronto-listed crypto lender Voyager Digital said in late June that it could lose more than $650mn in loans it made to the crypto investment firm co-founded by Su Zhu and Kyle Davies. Voyager late on Friday said it was suspending withdrawals and trading on its platform as it explores “strategic alternatives”. It added that it is “actively pursuing all available remedies for recovery from Three Arrows”.

BlockFi, another big crypto lender, said on Friday it had sustained around $80mn in losses due to the Three Arrows collapse even after it unwound some of its positions. BlockFi on Friday also announced a deal in which FTX will provide it fresh financing in return for an option that allows the crypto exchange to buy the group for up to $240mn.

Three Arrows is also facing regulatory scrutiny in Singapore. The Monetary Authority of Singapore reprimanded the group this week for providing false information and breaching an asset under management threshold. Authorities in the city-state said they had been investigating Three Arrows for a year. The fund was first managed in Singapore before shifting its domicile to the British Virgin Islands in September.

Three Arrows rose to prominence during the height of the crypto bull market that peaked in November 2021. Zhu pitched a “supercycle” thesis in which increasing mainstream adoption meant prices would continue to rise without falling back into a near-term bear market. However, as investors have raced away from speculative assets this year, the crypto market has come under intense pressure. The market value of the leading 500 crypto tokens has collapsed from a high last November of $3.2tn to under $1tn.

Three Arrows did not respond to a request for comment on its liquidation. Zhu said on Twitter last month, “We are in the process of communicating with relevant parties and fully committed to working this out.”