In what is believed to be the biggest failure of a crypto fund of its kind, Three Arrows Capital, the $10B hedge fund, will be taken over and its assets distributed among creditors after a court in the British Virgin Islands ordered its liquidation Monday, according to a person familiar with the matter.
Two employees at Teneo, a New York-based consulting firm, have been appointed to handle the liquidation, according to the source, who was granted anonymity to discuss the sensitive deal. In the British Virgin Islands, a U.K. overseas territory in the Caribbean Sea, an appointed liquidator takes control of the company in question.
Liquidation is the process of closing a company and distributing its assets among creditors. In recent weeks, Three Arrows, a onetime high-flying institution that evangelized for a “super-cycle” in crypto, has suffered heavy losses from major positions in Terra’s failed UST stablecoin, Grayscale Bitcoin Trust, and Lido’s staked ether.
Creditors have been circling and demanding repayment under threat of legal action. On June 27, Voyager Digital, a Canadian crypto exchange, said Three Arrows had defaulted on $700M in debt.
Voyager head of communications Drew Pierson declined to comment on Three Arrows’ liquidation Wednesday. Three Arrows co-founder Kyle Davies and Three Arrows attorney Nichol Yeo, of the Singapore-based Solitaire LLC, did not immediately return requests for comment Wednesday.
As the liquidator, Teneo’s job will be to protect the assets of the company and analyze how deeply underwater the fund is. That includes, but is not limited to, figuring out who the company’s creditors are, according to the source. A website will go online in the next couple of days to collect creditor claims.