(Bloomberg) -- Voyager Digital Ltd. faces steep losses if the crypto broker is unable to recoup a loan it made to troubled digital asset hedge fund Three Arrows Capital Ltd. 

Voyager said it may issue a notice of default to Three Arrows for failure to repay the loan, the company disclosed in a statement. The broker’s exposure to Three Arrows includes 15,250 Bitcoin and $350 million of stablecoin USDC, worth about $660 million based on Bitcoin’s price Wednesday morning in New York. 

A broad-based selloff in digital assets and the collapse of the TerraUSD and Luna tokens has left hedge fund Three Arrows facing liquidity troubles. The fund’s co-founders told the Wall Street Journal that it has hired legal and financial advisers after the crypto rout left it with large losses. A wave of liquidations has triggered fear of contagion risks for the industry. 

Voyager will seek to recover the debt from Three Arrows and is in discussions for legal remedies, according to the statement. It has made an initial request for a repayment of $25 million USDC by June 24, and then requested repayment of the entire balance of USDC and Bitcoin by June 27. Neither of these amounts has been repaid, and Voyager is currently unable to assess the amount it will be able to recover, the company said.

Toronto-listed Voyager has secured credit lines -- $200 million in cash and USDC stablecoins plus 15,000 Bitcoin -- from the investment arm of Alameda Research LLC. As of June 20, Voyager has about $152 million cash and owned crypto assets on hand, as well as $20 million of cash that is solely for buying stablecoin USDC, the company said. 

Voyager declined to comment beyond its statement while Three Arrows’ law firm didn’t immediately respond to a request for comment. Voyager plunged 44% at 9:45 a.m. in Toronto trading.

Alameda, a trading outfit from FTX Trading Ltd. founder Sam Bankman-Fried, is the largest holder in Voyager with a nearly 12% stake, according to Bloomberg compiled data. Bitcoin dropped back below $21,000 on Wednesday after staging a short-lived rally in Tuesday trading.

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