- The dispute between the liquidators of the bankrupt hedge fund 3AC, DeFiance Capital and Teneo will be heard in Singapore.
- However, DeFiance Capital contends that it should be segregated and reverted to its stakeholders.
- A Singapore judge decided the case should be heard in Singapore; a separate case in the British Virgin Islands is still ongoing.
A financial tussle of $140 million is unfolding between investment fund DeFiance Capital and Teneo, the liquidators overseeing the assets of the Three Arrows Capital (3AC) entity. The case is set to be heard in Singapore against the liquidators’ wishes.
Via @TheBlock__ – X
The dispute concerns the assets managed by DeFiance Capital, a fund run independently from 3AC but part of its corporate structure. According to judicial records accessed from The Block, Teneo asserts that these funds belong to the 3AC’s creditors. At the same time, DeFiance Capital contends that it should be segregated and reverted to its stakeholders.
While the liquidators denied that the case should be held, calling it an apparent afterthought, they said that any trial should occur in the British Virgin Islands, where the fund structure was based. Contrarily, DeFiance Capital’s stance was to have the hearing in Singapore, considering the location of its founder, Arthur Cheong, and its pool of investors.
Singapore’s Judiciary Rules In Favor Of Singapore
However, according to court notes from a hearing on August 8, Singapore Judge Chua Lee Ming decided the case should be heard and that the more appropriate venue would be Singapore. The judgment provided two primary justifications that the crypto in DeFiance Capital’s possession is held in Singapore. This is despite the liquidators arguing that cryptocurrencies don’t exist in any particular location. Another reason included that the trust was substantially created in Singapore.
He also said evidence such as the extent of Cheong’s control over the fund raises serious questions that should be heard at trial. Reacting to this decision, DeFiance Capital’s Arthur Cheong commented, “We are quite elated with the judgment as it significantly supports our stance.”
Further, Blossom Hing, an attorney from Drew and Napier representing DeFiance, also welcomed the decision, underscoring its potential to provide essential evidence for a fair resolution. However, Teneo has yet to release an official statement.
Similarly, the British Virgin Islands (BVI) discusses a similar case. This could result in two simultaneous judgments on an identical matter.
The disputed assets include $115 million of cryptocurrencies and NFTs held in DeFiance Capital’s possession. Additionally, 69 SAFE/SAFT agreements are inked under 3AC’s name. Estimations of the total value vary, with Teneo quoting $141 million and DeFiance Capital approximating around $120 million. As per Cheong, the discrepancy stems from the intrinsic challenges in evaluating such agreements.
DeFiance Capital’s Transition From 3AC
DeFiance Capital was launched in August 2020 within the 3AC structure, albeit with a different share class. With its own team and office space, the fund operated with significant autonomy, led by Cheong. Per their mutual agreement, a fraction of its administrative fees were remitted to 3AC.
Last February, a divergence emerged when 3AC’s founders, Kyle Davies and Su Zhu, proposed relocating to Dubai, an idea Cheong declined. This led to the inception of two Singapore-based firms in May 2022.
In May 2022, DeFiance Capital made a $35 million loan in the stablecoin USDC to 3AC. The fund will be a regular creditor concerning these funds, separate from those disputed in this legal matter.
The following month saw the founders of 3AC transfer specific legal rights related to DeFiance Capital, moving several assets out of the 3AC structure. However, this transition was not completed when 3AC declared bankruptcy.
However, in recent developments, Cheong has returned to active investing, securing approximately $20 million for a new venture, the DeFiance Liquid Venture Fund. This new endeavour operates distinctly from the entities entangled in legal disputes.
