3AC’s assets were $2bn less than liabilities in July: report

The holdings of now-defunct crypto hedge fund Three Arrows Capital (3AC) were worth roughly $1 billion as of July, while its liabilities were over $3 billion, the liquidator paper claims.

The liabilities greatly outweigh 3AC’s assets

Mid-June saw the collapse of 3AC, once one of the biggest and most well-known crypto hedge funds, due to liquidity issues. On July 1, the fund submitted a Chapter 15 bankruptcy petition in New York.

The Block obtained a document created by 3AC liquidator Teneo, which was distributed to the fund’s creditors on Thursday. According to it, 3AC’s assets consist of fiat money, tokens, NFTs, and venture investments. Owing to the volatility of cryptocurrencies, the value of the assets provided might change.

According to Teneo, it is currently unclear how much money will be recovered during the liquidation process because of the overall volatility of the cryptocurrency market and the substantial amount of illiquid investments owned by the company.

The projected assets are significantly undervalued compared to 3AC’s obligations, which total more than $3 billion.

As per the document, the assets were divided into the following parts:

— Fiat holdings: $37 million,

— Tokens: $238 million,

— NFTs: $22 million,

— Venture and other investments: $502 million.

The total asset value includes 3AC’s sub-portfolio funds, DeFiance Capital and Starry Night Capital, which have a combined value of about $217 million.

According to the paper, 3AC also had a tiny sub-portfolio fund named Warbler that “loaned all monies to or invested all funds within 3AC” and “itself did not hold any assets.”

Earlier this month, Teneo started seizing control of 3AC’s assets, including its cash and token holdings. The process of asset realization is described in Thursday’s slide. It mentions that Teneo has seized the Aptos and StarkWare tokens of 3AC.

The paper states that “the value of the Aptos tokens is USD 31.7 million based on values as of December 14, 2022; the value of the StarkNet tokens is not yet determinable while 134.2 million tokens are under the [joint liquidators] hands.”

Teneo has recovered assets totaling about $72 million. Still, after deducting its fees and other costs, the net value of the recovered assets is only about $64 million.

3AC’s founders avoid meeting with the liquidators

The document from Teneo included a description of its attempts to get in touch with Kyle Davies and Su Zhu, the founders of 3AC. Since its last conversation with either of the founders in August, the liquidator has made several legal attempts to compel their cooperation, including ones in Singapore, the British Virgin Islands, and New York. In Singapore, the liquidator recently obtained a court order to conduct discovery against the co-founders.

After 3AC’s demise in the summer, Davies and Zhu were generally silent on social media for a while. However, they started tweeting after things began to go south for FTX.

Although the founders have been reluctant to interact personally, Teneo observed in the study that they have “continued to provide extensive media appearances and have been quite active and receptive to comments via Twitter, particularly concerning the collapse of FTX.”

Even though the joint liquidators shouldn’t have to go to such lengths, Teneo stated that it would be “willing to travel to meet with the founders at a mutually convenient day and location” to ensure the returns for the unsecured creditors are maximized.

The liquidator stated that Zhu and Davies allegedly were in Bali, Indonesia, or the UAE. Teneo also claimed that, in the absence of cooperation, it had hired investigators to compile a thorough report on the company’s on-chain actions.