DeFiance Capital Scores Win in Singapore Dispute Against 3AC

DeFiance Capital is arguing its assets and operations were separate from 3AC so it shouldn’t be included in its liquidation process.

By: Pedro Solimano Loading...

In the $140 million dispute between DeFiance Capital and now-defunct crypto hedge fund Three Arrows Capital, a Singapore judge said in a Jan. 26 ruling that DeFiance Capital has reasonably demonstrated there is a Singapore-based trust protecting its assets, which could save it it from 3AC liquidators.

The argument could help sway the case in DeFiance Capital’s direction as the investment firm disputes that their shareholders have a legal obligation to make 3AC creditors whole, according to former restructuring attorney, who goes by the online name of WassieLawyer. Wsssie said he is working with DeFiance Capital founder Arthur Cheong on the case.

The collapse of the $10B 3AC hedge fund responsible for the “Super Cycle” thesis, arguing that crypto prices would only go up, produced large collateral damage in crypto. DeFiance Capital was one victim of the fallout and this ruling puts the firm one step closer to resolving the issue.

Positive Sign

The judge’s acknowledgement of the trust, although not enough to ensure DeFiance is in the clear, is a positive sign for the company, according to a former restructuring attorney, who goes by the online name of WassieLawyer.

This admission brings some “much-needed vindication” for Cheong, he said.

Once one of the largest crypto hedge funds in the world, Three Arrows Capital (3AC) the firm began to tank due to exposure to Terra, staked Ethereum, and Grayscale’s Bitcoin Trust, said its two founders, Su Zhu and Kyle Davies in a Bloomberg interview. As the company offloaded tokens across the digital asset industry it filed for bankruptcy on June 30, 2022.

Founded in 2020, DeFiance is a crypto investment firm that focuses on decentralized finance and GameFi. It backs dYdX, Aave and Lido, among other projects, according to its website. DeFiance Capital also participated in The Defiant’s $1.4 million seed round.

Substance Versus Form

When liquidators took over 3AC’s estate in 2022, they alleged 3AC and DeFiance Capital operated as one, with legal documents to back their claims.

WassieLawyer explained on Twitter Jan. 31, that DeFiance was only using 3AC’s legal structure (paying a fee for it), but never commingling operations. Carefully worded legal documents lay the foundation for 3AC creditors to try and seize DeFiance Capital funds.

“The big question in 3AC is that of substance v.s form,” said Wassie, one that Judge Ming has nodded will favor DeFiance’s substance arguments.