After inking a number of co-investment deals together, DeFinance is likely to take Three Arrows Capital (3AC) to court but in the form of arbitration. 3AC owes crypto lenders, including Voyager Digital, a collective sum amounting to billions of dollars. Its limited partners are now coming to terms with the prospect of their sizable investments going down to zero.
Over the years, 3AC developed a reputation as a savvy dealmaker in the upper echelon of crypto investors. But now it’s undergoing bankruptcy and broad restructuring. The relationship between DeFinance and Three Arrows Capital is unclear. The bankrupt firm played a big role in the launch of DeFinance in September 2020. 3AC provided back and middle office support and access to deal flow and consultations on hiring.
Besides investing alongside each other in a number of projects, 3AC and DeFinance shared service providers but it’s unclear as to who paid what. They also had a number of limited partners in common. Investors redeemed some capital from DeFinance amid the recent market downturn. A source said DeFinance’s flagship vehicle outperformed Bitcoin since inception.
Arthur Cheong, the founder of DeFinance, like other crypto firms, was shaken by the collapse of Terra’s stablecoin. But the damage to DeFinance was minimal as it also had a decent-sized stake in the Luna Foundation Guard (LFG). Sources pointed out that with the market conditions, it’s obvious that there would be more people who want to de-risk and lower their crypto exposure.