A crypto-hedge fund moves NFTs worth millions to a single wallet, leading to speculation about a bankruptcy-induced fire sale
The biggest question in the crypto industry these days seems to be where in the world are Su Zhu and Kyle Davies? The duo, the founders of the Singapore-based cryptocurrency hedge fund Three Arrows Capital (3AC), which was forced into liquidation on June 27, has reportedly avoided litigation and their current location is still unknown.
Creditors are now asking a bankruptcy court in New York to freeze 3AC’s estimated $ 3 billion in assets, which are mostly in the form of cash, cryptocurrencies and NFTs, citing concerns that they may be “transferred or otherwise disposed of.“Because of these concerns, and raised speculation that a fire sale of expensive NFTs may be underway, Starry Night Capital, the NAC off-shoot of 3AC, moved much of its multimillion-dollar collection to a single wallet last month. .
According to open source data, NFTs from The night of the stars account was transferred to a wallet listed as AEB785. Several of the transfers started on June 14, two days before Financial Times first reported that Three Arrows had failed to meet a margin requirement of a $ 670 million loan.
The new wallet now has several highly valued NFTS, perhaps worth millions, including works by artists such as Erick Calderon from Art Blocks and Mad Dog Jones, among others. A piece by Dimitri Cherniak, with the title A small lack of symmetry can cause so much painwas purchased in October last year for 800 ETH, or more than $ 2 million at the time.
Kryptofondet’s investment in NFTs reached the top of the market in August 2021, when the company entered into a partnership with the pseudonymous NFT collector, Vincent Van Dough–who so far has not commented on the scandal, despite the fact that he is still relatively active on Twitter – to launch Starry Night Capital. The group basically charged to raise $ 100 million that it said would be used to create an educational platform for NFTs, next to a physical gallery in a big city, which none of them could afford.
Excited to work with @zhusu and @ kyled116 from 3AC to launch @StarryNight_Capan NFT fund.
Our dissertation is simple, we believe that the best way to gain exposure to the cultural paradigm shift that is initiated by NFTs is to own the top pieces from the most desired sets.
– VincentVanDough (@Vince_Van_Dough) August 30, 2021
Over the past year, Starry Night Capital spent $ 21 million to acquire 457 virtual assets. However, based on recent estimates compiled by DappRadar using data on the chain, the inventory transferred to the AEB785 wallet now has an estimated net worth of only $ 3.89 million.
According to CoinMetrics researcher Kyle Waters, Starry Night Capital’s collection at one time accounted for 10% of the total volume of SuperRare, the sixth largest NFT platform by market value.
“The new wallet appears to have some link to other 3AC wallets,” Waters wrote on Twitter, adding that “it is so far unclear what is happening (at worst, preparation for some sort of liquidation / OTC). . [Over the Counter] block trade with NFT?
1 / During the last 24 hours, Three Arrows provided capital-supported NFT funds @StarryNight_Cap has moved the entire collection on SuperRare, a total of 70 works that it has spent> $ 21 million on since August last year. pic.twitter.com/rNZVJ0li8I
– Kyle Waters (@kylewaters_) June 15, 2022
In an ominous move, the only institutional backer of Starry Night’s holdings, the British KR1 fund, has written off their investment completely. KR1 bought $ 5 million of “Class Starry Night Shares” in the British Virgin Islands-registered Three Arrows Fund Ltd, although it is unclear whether such a company actually exists, CoinDesk reported. These shares were 100% weakened according to a recent earnings statement issued by KR1.
If Starr Night’s NFT collection were to be sold today, when the prices of crypto art have cratered, the vast majority of the works would earn significantly less than what they were procured for.
Total value of sales involving a non-fungible token (NFT) in the art segment worldwide during the last 30 days from 15 April 2021 to 15 June 2022. According to data from Statista.
In addition to freezing the fund’s assets, creditors ask the court to compel the founders to list the fund’s assets, including wallets it controls, bank accounts, cash and digital assets, as well as any derivative contracts, securities, accounts receivable, and company records. Lawyers acting on behalf of creditors said Zhu and Davies “have not yet started cooperating” with liquidation cases, according to CoinDesk.
Founded in 2012, it seems that 3AC’s fall stems from Ponzi-like activity which included loans from various lending platforms to repay the interest on previous loans. The fall of the fund has caused ripple effects across the cryptosphere, with liquidity concerns other companies, including the lending company Celsius, the cryptocurrency exchange CoinFlex and the digital asset brokerage house Voyager Digital, all of which had business with 3AC.
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