Three Arrows’ CryptoPunks and Other 'Starry Night' Ethereum NFTs Set to Be Liquidated

Three Arrows’ CryptoPunks and Other ‘Starry Night’ Ethereum NFTs Set to Be Liquidated

5 October 2022

in Meta News

Reading Time: 4 mins read

In brief

Ethereum NFTs belonging to Three Arrows Capital through its Starry Night Capital fund are now in the possession of liquidator Teneo, the firm said.
Starry Night Capital spent tens of millions of dollars acquiring high-value NFTs, such as Art Blocks, CryptoPunks, and Rare Pepe assets.

After expensive Ethereum-based NFTs belonging to crypto hedge fund Three Arrows Capital were moved to a new wallet this week, the liquidator behind the firm’s bankruptcy proceedings has confirmed that it has taken custody of the collection.

Teneo, the business advisory firm leading the Chapter 15 bankruptcy process, said in a statement that it now has possession of the NFTs owned by Starry Night Capital, a fund established by Three Arrows Capital and pseudonymous investor Vincent Van Dough in 2021. Most of the assets were transferred to the new wallet over the last two days.

According to the liquidator, all of Starry Night Capital’s NFTs “have been accounted for and are in our possession or are being transferred to us.” Teneo credited Vincent Van Dough for facilitating the transfer of the NFTs and making sure that they weren’t sold outside of the liquidation process. Teneo also said that the pseudonymous collector will help the firm sell the NFT collection to cover Three Arrows Capital’s losses.

Once a high-profile hedge fund in the crypto space, Three Arrows Capital became insolvent in May following the collapse of Terra’s UST and LUNA ecosystem, in which the firm was heavily invested. Three Arrows Capital cited other recent bad bets, including on staked Ethereum and the Grayscale Bitcoin Trust, that founders Su Zhu and Kyle Davies said were also a factor.

Three Arrows filed for Chapter 15 bankruptcy proceedings in June, and claimed that it owed $3.5 billion to creditors following its collapse. In August, Singapore’s high court approved a deeper probe into the firm’s collapse.

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The hedge fund’s Starry Night Capital was announced in August 2021 as the NFT market soared to new heights, with plans to raise as much as $100 million to purchase and hold high-value NFTs. The fund was announced alongside its purchase of an Art Blocks Ringers NFT from Dmitri Cherniak for $5.66 million worth of ETH at the time.

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The collection expanded with an array of other Art Blocks NFTs, along with CryptoPunks, Rare Pepes, and other valuable pieces. An incomplete list of Starry Night’s holdings from data platform Dune suggests that the firm spent at least $35 million on NFTs in 2021.

However, valuing the collection amid the sinking NFT market—with valuations and trading volume down significantly amid the wider crypto market decline—is challenging due to a lack of liquidity and comparable recent sales for some of the NFTs.

Crypto analytics firm Nansen pegged the value of the collection at about $846,000 worth of ETH, but many of the individual estimates are well below the last purchase price. More likely, given the continued demand for CryptoPunks and artwork from prominent generative art creators, Teneo could recover millions of dollars’ worth of ETH by liquidating the NFT holdings.