Liquidators have taken control of the Starry Night Capital NFT Fund and plan to sell the assets to pay Three Arrows’ obligations. Three Arrows Capital’s Starry Night Capital fund held Ethereum NFTs. They are now in Teneo’s possession. Starry Night Capital spent millions of dollars to acquire high-value NFTs such as Art Blocks and CryptoPunks.
After Ethereum-based NFTs that belonged to crypto hedge fund Three Arrows Capital were moved to a new wallet this week by the liquidator, it was confirmed that it had taken custody.
Teneo, the business advisory company leading the Chapter 15 bankruptcy proceedings, stated in a statement it now owns the NFTs of Starry Night Capital. This fund was established in 2021 by Three Arrows Capital as well as pseudonymous investor Vincent Van Duyck. The majority of the assets were transferred to the newly created wallet in the past two days.
The liquidator stated that all Starry Night Capital’s NFTs were “accounted for” and are either in our possession or being transferred to us. Teneo also credited Vincent Van Dough with facilitating the transfer and making sure they weren’t sold during the liquidation process. Teneo stated that Three Arrows Capital will be able to sell its NFT collection through a pseudonymous collector.
Three Arrows Capital, once a prominent hedge fund in crypto, was insolvent after the collapse in Terra’s UST, LUNA ecosystem and LUNA blockchain. The firm had been heavily invested in this space. Three Arrows Capital also mentioned other recent problematic investments, such as the staked Ethereum or the Grayscale Bitcoin Trust. Founders Su Zhu and Kyle Davies both mentioned these as still being a factor.
Three Arrows filed for Chapter 15 bankruptcy in June. It claimed it owed $3.5 million to creditors after its collapse.
In August, Singapore’s High Court approved a deeper investigation into the company’s collapse.
Starry Night Capital, the hedge fund, was launched in August 2021 when the NFT market reached new heights. Plans were made to raise up to $100 million to buy and hold high-value NFTs. The announcement was made alongside the purchase of an Art Blocks Ringers NFT by Dmitri Cherniak, which cost $5.66 million in ETH.
The collection was expanded by an assortment of Art Blocks NFTs as well as CryptoPunks and Rare PEPES. A partial list of Starry Night’s holdings is available from the Dune data platform. It suggests that spent at most $35 million on NFTs by 2021.
The collection’s value is difficult to determine given the falling NFT market, with trading volumes and valuations down significant amid the larger crypto market drop. The reason is a lack of liquidity and similar recent sales for some NFTs.
The collection’s value was estimated at $846,000 by the crypto analytics firm Nansen, though many individual estimates are significantly lower than the original purchase price. Teneo could easily recover millions of dollars in ETH by liquidating its NFT holdings. This is due to the continuing demand for CryptoPunks as well as artwork created by prominent generative artists.