Three Arrows Owes Polkadot Developer Moonbeam Foundation Over $27M, Court Documents Show

Recent court documents show that beleaguered crypto hedge fund Three Arrows Capital owes blockchain development lab Moonbeam Foundation over $17 million worth of stablecoins and $10 million worth of Moonbeam-issued tokens.

“We are reiterating our demand for the immediate repayment of our two outstanding loan principals [$7 million in USDC and $10 million in USDT, both stablecoins],” Moonbeam Director Aaron Evansa wrote to Three Arrows in June.

The agreement was made between Moonbeam Foundation and Three Arrows on Sept. 20, 2021. Three Arrows, also known as 3AC, borrowed the open term loan at a 12% interest rate.

Separately, 3AC was additionally engaged by Moonbeam as a “liquidity consultant” for the network’s moonriver (MOVR) and glimmer (GLMR) tokens. Moonbeam is a smart contract network based on Polkadot that allows for interoperability between the Polkadot and Ethereum networks.

Three Arrows held over 10 million GLMR tokens and 200,000 MOVR tokens. These have not been returned to Moonbeam as of July 15. These are valued at nearly $10 million at current market rates.

Under the terms of the liquidity consultancy, 3AC was tasked by Moonbeam to make "commercially reasonable efforts to open up new markets" for the two tokens, with the hedge fund also conducting "market analysis" and suggesting new "suitable exchanges" for the tokens to trade on.

However, Three Arrows was not liable to “the ultimate performance” and had no specific trading volume targets. The obligations were “limited to making commercially reasonable efforts to advise on methods to increase liquidity” for river and glimmer tokens.

Meanwhile, the documents show that Moonbeam paid Three Arrows a sum of $90,000 as a six-month fee in installments for the consultancy services.

3AC has been an active investor in the digital asset industry in recent years, with investments across non-fungible tokens, decentralized finance, layer 1 blockchain firms and crypto companies.

The hedge fund, however, suffered massive losses following the Terra system’s implosion of its LUNA currency in mid-May and a market-wide decline in June, leading to its insolvency. Lawyers involved in the liquidation proceedings of Three Arrows Capital in the British Virgin Islands have stated Su Zhu and Kyle Davies, the hedge fund’s founders, have not been cooperating in the proceedings so far and their current location is unknown.