Three Arrows-backed Protocol Says Major Chunk of Treasury Is Unaccounted For

Blockworks exclusive: Many protocols backed by Three Arrows kept their funding round capital, plus portions of their own treasuries, with the fund manager

article-image

Three Arrows Capital

share

key takeaways

  • A DeFi protocol backed by Three Arrows Capital says the fund controlled a large portion of its treasury
  • The protocol has not received any communication from Three Arrows co-founders or the TPS Capital Team since liquidation speculation began

A decentralized finance protocol backed by the now-unraveling Three Arrows Capital has a significant portion of its treasury unaccounted for. It has not heard from the Three Arrows team this week, according to the protocol’s founder, who agreed to speak with Blockworks on the condition of anonymity. 

The protocol closed a seed funding round, led by Three Arrows, in 2021. As part of the round, the protocol received stablecoins USD Coin and Tether, which the company could have either actively managed by lending it on a decentralized market or opted to keep all or a portion of it with TPS Capital, Three Arrow’s over-the-counter trading desk. 

Three Arrows guaranteed 8% annual returns on this treasury management service. Because of the high yields, many protocols backed by Three Arrows decided to keep their funding round capital, plus portions of their own treasuries, with Three Arrows, the founder said. 

It felt like the safer option, the protocol’s founder said, compared to the alternative — deploying the capital through risky smart contracts. The decision was further validated when it was unaffected by Terra’s collapse, but now, a notable chunk of the protocol’s treasury is unaccounted for. 

Speculation about Three Arrows’ insolvency began Tuesday following a cryptic Tweet from co-founder Su Zhu. The Block later reported Three Arrows was scrambling to find funds to repay lenders and other counterparties after major liquidations.

The protocol has not received any communication from Three Arrows co-founders Zhu and Kyle Davies or the TPS Capital team since June 10, the founder said. 

The founder said that the protocol is weighing its legal options and has been in contact with two other Three-Arrows-backed protocols that face the same uncertainty about the state of their treasuries. 

Another Three Arrows-backed protocol confirmed with Blockworks that the fund asked to manage its treasury, an offer the protocol declined. 

This is a developing story.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research

article-image

Big blockers wasted a bitcoin fortune trying to prove a point

article-image

Coinbase’s newest acquisition includes the CEO and Head of Research from Opyn

article-image

Crypto’s highest purpose might be to make markets better by making them bigger

article-image

The non-profit’s “Project Open” seeks to let stocks trade directly on Solana

article-image

The acquisition is Pump.fun’s first, and comes just days before its planned ICO

article-image

As Trump’s tariff war reignites, everyone is assuming the dollar will continue its path lower. But the journey might be bumpy