Cody McGrath 
Three Arrows Capital is alleged to ghost customers and debtors by not responding to margin calls.
Three Arrows Capital, the embattled crypto hedge fund, is accused of utilizing customer assets to fulfill margin calls on its positions.
Danny Yuan, the CEO of cryptocurrency trading firm 8Blocks Capital, claimed that Three Arrows spent around $1 million of 8Blocks’ cash to respond to its margin call. In 2020, 8Blocks reached an arrangement with the hedge fund to use the latter’s trading accounts.
The charges come as Three Arrow faces repeated debtor liquidations, amidst a steep drop in the cryptocurrency market.
Some of the firm’s bets have already been liquidated, which has contributed to a drop in the crypto market, particularly Ethereum prices.
Yuan of 8Blocks claimed in a Twitter thread that the company had requested a withdrawal of its cash from Three Arrows earlier this week, which was denied.
The corporation then discovered that around $1 million of its cash with Three Arrows had gone missing. 8Blocks’ attempts to approach Three Arrows were once again rejected.
Yuan further claims that Three Arrows failed to respond to margin calls from some of its debtors, causing them to liquidate the hedge fund’s assets. As a result, the overall market dived.
The CEO of 8Blocks has now filed a lawsuit against the hedge fund. To that aim, he urged other crypto platforms holding Three Arrows assets to freeze their positions for lenders to retrieve them through legal action.
This week, Three Arrows founder Zhu Su stated that the company is “communicating with relevant parties” about the recent decline. However, on Twitter, Su has distanced himself from Ethereum.
Crypto markets have recently begun to recover from recent losses, lowering the risk of a larger liquidation for Three Arrows.
However, the company is not out of the woods yet. Because the token has de-pegged from Ethereum, its large exposure to Lido Staked Ethereum (stETH) exposes the corporation to margin calls.
Its exposure to the troubled lender Celsius, which recently banned withdrawals, is also expected to put a strain on its portfolio.