3AC Collapse

Three Arrows Capital's collapse in June 2022 was the critical link between Terra's death spiral and FTX's implosion. After LUNA crashed, 3AC — which had massive exposure to Terra — couldn't meet margin calls. Lenders like Voyager, BlockFi, and Genesis who had extended billions in credit to 3AC were left holding the bag. Voyager and BlockFi filed for bankruptcy. Genesis's struggles eventually took down its parent company DCG's lending arm. The cascade of failures eroded confidence in centralized lending across the industry and ultimately contributed to the conditions that exposed FTX's fraud. 3AC's collapse showed that crypto's biggest players were all deeply interconnected, and one failure could bring down the entire house of cards.