Just weeks before filing for bankruptcy protection, crypto hedge fund Three Arrows Capital (3AC) sent lender Voyager Digital a one-page net asset value (NAV) statement, court documents filed Tuesday show. A single due-diligence call was conducted between the two firms. Voyager, which itself filed for bankruptcy protection in July, reported a $654 million loan to 3AC that accounted for almost 58% of its loan portfolio.

The document dated May 13, 2022, gave Three Arrows Capital's NAV as just under $2.4 billion. The fund filed for Chapter 15 bankruptcy in New York on July 1. The call took place Feb. 28, 2022, and lasted either 30 minutes, according to Voyager Chief Commercial Officer Jon Brosnahan, or an hour, according to Treasury Director Ryan Whooley.

The filings reveal the level of due diligence carried out by Voyager Digital with regard to Three Arrows Capital, whose failure sparked a wave of collapses among other crypto firms. Genesis Global Holdco, a CoinDesk sister company, reported that its Asia-Pacific unit had lent 3AC $2.4 billion in cash and digital assets. Crypto lender Celsius Network cited loans worth $75 million, and BlockFi also said it suffered “material losses” from the bankruptcy because 3AC was one of its largest borrowers.

"The Voyager due diligence team did not have 3AC’s income statements, cash flow statements, or balance sheet. It did not do any stress testing of 3AC’s liquidity," the court documents say. "During our interviews, numerous employees involved in due diligence (including Mr. Brosnahan and Mr. Whooley) told us that they did not have a background in credit risk evaluation."

Under its proposed bankruptcy plan, Voyager's assets are up for sale to the U.S. wing of crypto exchange Binance, though this sale is subject to some scrutiny by the Securities and Exchange Commission (SEC).

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