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3AC’s Deribit Exposure Could Be Overvalued

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A dispute about the valuation of an indirect stake in crypto options exchange Deribit is playing out behind the scenes of the Three Arrows Capital (3AC) liquidation proceedings.

According to a leaked affidavit by Teneo, 3AC’s court-appointed liquidator, the embattled hedge fund’s remaining assets include shares of Grayscale Bitcoin Trust, cryptocurrencies like BTC, AVAX and NEAR, and shares of Deribit – which according to the court documents are valued at approximately US$500 million.

However, a source with knowledge of the matter has told media outlets that the value of 3AC’s remaining assets is overestimated, with the firm’s Deribit shares valued closer to US$25 million rather than US$500 million, which means that creditors might be left in the lurch.

Read more: What We’ve Learned From the Leaked 3AC Affidavit

According to the source, there are multiple reasons for the discrepancy, one being that the private-market valuation of Deribit’s shares is believed to have fallen during the recent crypto crash. The source also claims that 3AC does not directly own shares in Deribit, instead owning shares in a Singapore-registered Special Purpose Vehicle (SPV) called 3AC QCP Deribit SPV, whose largest shareholders are 3AC and QCP Soteria Node.

The SPV reportedly owns over 23% of Deribit, and of that total, 3AC owns 16%, which means that due to several “material encumbrances”, the value of the 3AC SPV shares are overvalued.

“A significant discount needs to be placed on the value of the 3AC SPV shares because any buyer of these shares would be subject to these encumbrances and would have significant difficulty monetising the shares in the future and would also have to deal with the entire SPV which has close to 30 members”, the source told Cointelegraph.

The source also added that 3AC have been selling portions of their 16% stake via “side letters” to parties that are now claiming ownership over the 3AC SPV shares.

“There are at least four known parties who have these side letters and have put in their claims to ownership of the 3AC shares in the SPV. Some of them are on the liquidator’s official list of creditors”, they said.

Read more: 3AC Leak – Did Equities First Get its Valuations Second?

Court filings indicate that 3AC currently owes about US$80 million to Deribit in unpaid loans and negative values in a trading account, with both Deribit and among the creditors that pushed for the liquidation of 3AC.