Liquidator of Three Arrows Capital may seek to recover $1.2B from DCG and BlockFi.

The liquidator of Three Arrows Capital (3AC) is considering reclaiming approximately $1.2 billion from Digital Currency Group (DCG) and crypto lender BlockFi. These funds were paid by the hedge fund before the liquidation process began, but as the liquidation was imminent.

A confidential report from Teneo, the liquidator, dated July 7, mentions over $1 billion in potential claims against DCG and its Genesis lending subsidiary. These claims include both preference claims and claims related to issues with loan and security documentation. The report also highlights over $220 million in preferential payments made to BlockFi.

Teneo declined to comment on any plans to recover the funds, and requests for comment from DCG and BlockFi were unanswered. DCG, which invests in crypto companies, is the parent company of blockchain.

Preference claims come into play if the hedge fund knowingly made payments that favored certain creditors over others. In this case, the claims are related to transactions made by 3AC during the insolvency twilight zone that followed the collapse of the Terra Luna project earlier in 2022.

Edited by Sheldon Reback and Nick Baker.