Three Arrows Capital (3AC)’s liquidator may attempt to recoup around $1.2 billion from Digital Currency Group (DCG) and cryptocurrency lender BlockFi by clawing back payments made by the hedge fund as liquidation approached but before the procedure began.
A confidential July 7 report from Teneo, the liquidator,that CoinDesk examined included “prospective claims” totaling more than $1 billion against DCG and its Genesis lending business, including “both preference claims and claims which have resulted from issues around the perfection of loan and security documentation.” Additionally, it mentioned “preferential payments” to BlockFi totaling over $220 million.
Teneo refuses to comment on any strategies for clawing back money. Requests for comment from DCG and BlockFi were not answered. The parent firm of CoinDesk is DCG, a cryptocurrency investor.
If the hedge fund knew it was making payments that would benefit one or more creditors over other creditors, preference claims may come into play. The transactions in question here were made by 3AC during the “insolvency twilight zone” that followed the failure of the Terra Luna project earlier in 2022.