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Three Arrows Capital Wallet Removes Millions in ETH From DeFi Liquidity Pools

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A wallet belonging to embattled hedge fund Three Arrows Capital has removed $33M in Staked ETH (stETH) from Curve Liquidity Farming Pool.

According to Etherscan and Nansen, the embattled crypto hedge fund also removed 200 bitcoin (BTC), $4 million worth of Tether (USDT), and $4 million in wrapped ether (wETH) from Convex, another DeFi platform.

Three Arrows Capital filed for bankruptcy in July after it fell victim to the collapse of TerraUSD, an algorithmic stablecoin. Three Arrows had invested $200 million in a $1 billion sale of Luna, the sister coin of TerraUSD, funds which went into the Luna Foundation Guard, a reserve of assets designed to prop up TerraUSD’s peg to the U.S. dollar. When TerraUSD and Luna collapsed, the hedge fund’s holdings got wiped out soon after. Co-founder Kyle Davies said the company could absorb the loss at the time.

Why now?

The motive behind Three Arrows’ withdrawal is unclear. StETH, issued by staking pools like Lido Finance in exchange for ETH, can only be redeemed for ETH between six and twelve months after the Ethereum network transitions from proof-of-work to proof-of-stake. That is unless one uses Curve, which has a liquidity pool for trading between stETH and ETH, which has become unbalanced with more stETH than ETH.

By removing funds from Curve, 3AC could be readying itself to borrow ETH against the collateral of its stETH to make itself eligible for the airdrop of a new token from a fork of the Ethereum blockchain. Otherwise, it would need to wait until the stETH can be redeemed for ETH after the Ethereum merge.

It earlier dumped stETH into Curve, along with Alameda research, after the token began trading at a discount to the primary crypto on the Ethereum network, ether.

Unwrapping its wrapped ETH would alter the ETH balance in its wallet, making the
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