The Future of Three Arrows Capital: Creditors to Receive 45.74% of Claims
The joint liquidators of the defunct crypto hedge fund Three Arrows Capital have estimated that creditors will receive 45.74% of their claims with the bankrupt estate, with initial distributions planned for the first quarter of next year.
In a December report to creditors, Teneo’s joint liquidators Russell Crumpler and Christopher Farmer stated that the estimated value of the company’s assets stood at $1.16 billion as of December 18, while claims worth $2.7 billion are expected to be recognized for distribution.
Teneo settled litigation against several parties, including DCG, Genesis, and BlockFi, which boosted the firm’s reported assets by an estimated $292 million. However, the BlockFi settlement is still subject to approval.
Detailing the Assets on Hand
A breakdown of the assets shows that the majority held by the liquidators are illiquid tokens subject to vesting periods. Only 6% of the portfolio is liquid.
The illiquid tokens make up 82% of assets, while equity and investments account for 6.9%, and cash makes up 4.8%.
There are 13 different tokens comprising the illiquid tokens, with a combined value of $563 million at current prices. These tokens are subject to vesting schedules with approximately $50 million of assets to be unlocked in most quarters until the end of 2026. By the end of 2024, $200 million worth of tokens will have been unlocked.
The liquidators have staked some of these tokens, resulting in $5.4 million in staking rewards. Additionally, cash holdings have generated $1 million in interest payments.
The liquidators have been converting liquid tokens and NFTs to fiat, having sold $34.5 million worth of liquid tokens and $15 million worth of NFTs. Combining these sales with other asset sales, the liquidators have realized $66 million.
Freezing Assets and Ongoing Litigation
A British Virgin Islands court has frozen up to $1.1 billion worth of assets belonging to 3AC co-founders Su Zhu and Kyle Davies, as well as Davies’ wife Kelly Chen.
The liquidators’ report reveals that they have filed a claim for insolvent trading against the 3AC founders for $1.078 billion. They have also filed claims against Davies for $66 million and Chen for $4.6 million.
Zhu was arrested in Singapore on September 29 and sentenced to four months imprisonment. He was later allowed to serve the rest of his sentence under house arrest and was released on December 20 after serving two-thirds of his sentence.
Davies, on the other hand, has yet to cooperate meaningfully or serve the custodial sentence ordered against him.
Litigation involving DeFiance Capital is still ongoing, with parallel proceedings in the British Virgin Islands and Singapore. The liquidators are also investigating 3AC’s relationship with Tai Ping Shan, a company that worked closely with them.
The bankruptcy proceedings have incurred legal fees amounting to $49.7 million.
Hot Take: Three Arrows Capital Creditors Set to Receive 45.74% of Claims
The joint liquidators of Three Arrows Capital have estimated that creditors will receive 45.74% of their claims from the bankrupt estate, with distributions planned for early next year. The company’s assets are valued at $1.16 billion, while claims worth $2.7 billion are expected to be recognized for distribution. The liquidators have focused on illiquid tokens, which make up the majority of the assets, with only 6% being liquid. They have been converting tokens and NFTs to fiat, resulting in $66 million in asset sales. However, ongoing litigation and frozen assets belonging to co-founders Su Zhu and Kyle Davies pose challenges for the liquidators.
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