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The first meeting of Three Arrows Capital’s (3AC’s) creditors is taking place on July 18, three sources with direct knowledge of the matter told The Block.

The meeting will be hosted by financial advisory firm Teneo, which is the court-appointed liquidator of 3AC, the sources said.

Law firm Ogier, which has been appointed to advise Teneo — specifically, joint liquidators Russell Crumpler and Christopher Farmer of Teneo (BVI) Limited — also stated last week that the meeting will occur July 18.

Teneo has created a dedicated website for creditors to update them and the public on the latest developments around the 3AC’s liquidation process. The details of the first meeting will be available on this website, according to Ogier.

The specific agenda of the meeting isn’t clear. But one source told The Block that Teneo could establish a creditor board representing creditors of 3AC and announce the progress of the liquidation process in the meeting.

It is unclear whether the meeting will be live-streamed publicly. Ogier or Teneo did not immediately respond to The Block’s requests for comment.

3AC was placed in liquidation on June 27 following an order of the Eastern Caribbean Supreme Court in the British Virgin Islands (BVI’s) High Court of Justice. Per the court order, Teneo was appointed to handle the liquidation of 3AC.

On July 1, 3AC filed Chapter 15 bankruptcy in the Southern District of New York, seeking protection from creditors. Earlier today, a judge in the Southern District of New York’s bankruptcy court granted an order for provisional relief, giving the joint liquidators of Teneo control of known assets and granting the ability to serve subpoenas to founders and firms with pertinent information.

Amit these proceedings, the founders of 3AC — Su Zhu and Kyle Davies — have remained almost unreachable by Teneo and other parties involved. Court documents show that both had “failed to cooperate” during the process.

“While persons identifying themselves as ‘Su Zhu’ and ‘Kyle’ were present on the Zoom call, their video was turned off and they were on mute at all times with neither of them speaking despite questions being
posed to them directly,” the latest court document states.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• As one of the top 100 crypto projects by market capitalization, Gala Games is a blockchain-based entertainment platform that has diversified its business ventures into three different areas: games, music, and film.
• There are eight components to the Gala Games structure: its proprietary network, project GYRI, GALA token, gaming ecosystem, Gala Store, Gala Music, Gala Film, and Gala Labs.
• There is a great deal of opaqueness concerning its token economy and business model.

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Stepn, a Solana-based game that rewards users with cryptocurrency for walking or running, announced Tuesday that it has earned $122.5 million from platform fees in the second quarter of 2022. 

Five percent of those earnings will go toward buying and burning Green Metaverse Token (GMT), the game’s governance token that users earn after reaching level 30, as well as sneakers, non-fungible tokens that a user must have to begin earning in-game cryptocurrencies. 

The move to burn GMT is unusual, considering that GMT has a fixed supply of 600 million coins, whereas Stepn’s other in-game currency Green Satoshi Token (GST) has an unlimited supply, making it more likely to experience inflation.  

It’s also not common for blockchain-based gaming projects to buy back their own tokens. This practice is more common among decentralized finance (DeFi) protocols such as PancakeSwap. 

Still, Stepn announcing the GMT burn shows that it’s making steps to avoid the destructive in-game token inflation that plagued other blockchain-based games such as Axie Infinity. Imbalanced issuance-to-burn ratios of Axie’s in-game tokens contributed to the once popular game’s ultimate decline, The Block previously reported.  

In addition to using Q2 profits for token buybacks, Stepn stated that it will use the funds to bolster security, reduce cheating and expand its team.  

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The legal team attempting to recoup funds from embattled fund Three Arrows Capital have gotten the green light to issue subpoenas to the founders and relevant firms for information in the investigation. A judge in the Southern District of New York has issued an order granting provisional relief. 

Three Arrows Capital is facing insolvency after being liquidated by its lenders. The fund sustained significant losses during the collapse of the Terra ecosystem and faced further turmoil during a wider industry selloff. In June, 3AC founders Su Zhu and Kyle Davies were reportedly figuring out how to repay their lenders and other counter-parties.

As the predicament worsened, it began insolvency proceedings in the British Virgin Islands, where a court-appointed financial advisory firm Teneo to handle the liquidation. Those insolvency proceedings came with Chapter 15 bankruptcy proceedings in the Southern District of New York, which allows a foreign debtor to file for bankruptcy in the US. 

Adam Goldberg from Latham & Watkins represents Teneo’s Russel Crumpler and Christopher Farmer of Teneo in their attempts to coordinate the liquidation in the British Virgin Islands with stateside proceedings. Farmer and Crumpler are senior managing directors at Teneo. 

But amid these proceedings, the founders vanished. A month passed with no communication from the founders, and court documents in the Chapter 15 proceedings showed that Davies and Zhu had “failed to cooperate” during the process.

A hearing today sought an order granting provisional relief, which usually attempts to freeze the status quo of assets as proceedings move forward. Indeed, Goldberg said that Davies and Zhu haven’t been located. 

“The founders’ location continues to be unknown to the liquidators, and they have not offered any meaningful cooperation as of the time of this hearing. There have been communications between counsel purporting to represent the founders and the liquidators,” he said.

Part of that communication is a list of certain assets from the founders which was provided only 24 hours before today’s hearing. Goldberg said the list is not complete in the view of liquidators and does not contain bank account information.

“This is by no means a sufficient form of cooperation. And I should note it came only after we filed this emergency motion before the court,” he said.

Multiple failed attempts to reach Zhu and Davies led to today’s hearing, in which liquidators sought a motion to obtain discovery or more information about the state of 3AC. And according to comments from Goldberg, firms entangled with 3AC’s turmoil want to share what they have, but they need a legal impetus to provide the information due to regulations and requirements. 

“I should note, particularly on that last point, in recent days since the filing of the motion and as this case has gained more attention, we’ve actually received inquiries from certain institutions that are looking for a subpoena here that have confidentiality or other regulations that require them to be subject to legal process before they’re able to turn over information,” he said.

Judge Martin Glenn granted the provisional motion, allowing subpoenas to be sent to the founders and those with the knowledge that could be salient to the investigation. Additionally, Crumpler and Farmer will be entrusted with the administration of the realization of 3AC’s affairs and assets in the US, meaning no one else will be able to transfer or dispose of 3AC’s assets in the meantime.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

BlockFi has unwound its positions in Grayscale’s Bitcoin Trust, a spokesperson confirmed to The Block.

The lending platform, which made headlines earlier this month for its injection of capital from crypto exchange FTX, has managed to navigate the aftermath of Three Arrows Capital’s meltdown without having to pause withdrawals while industry rivals continue to grapple with serious financial headwinds.

While BlockFi claims its exposure to Three Arrows was limited, it was heavily exposed to the Grayscale Bitcoin Investment Trust (GBTC), an investment product which saw its discount to NAV drop precipitously to more than -34% amid the fallout of the beleaguered hedge fund. 

BlockFi has now unwound its positions in GBTC, a spokesperson for the firm said. Moving forward, it will not accept the product as collaterally. The firm plans to announce this move later this week. 

Responding to a tweet penned by CoinShare’s Meltem Demirors, BlockFi CEO Zac Prince said that BlockFi “directly holds zero GBTC.”

“We have a couple small loans (like sub $10M) w/ GBTC as collateral that are in the process of winding down,” he said. 

Those loans have also been wound down. 

The move is the latest by BlockFi to de-risk in an environment that has seen lenders scale back, hike rates, and generally act more conservatively. 

It’s particularly striking that BlockFi is moving on from GBTC considering it once held a more than 5% of the total supply. GBTC enables traders to gain exposure to bitcoin without directly buying and holding the crypto themselves.

As reported in October 2021, Prince explained the logic for snapping up GBTC as follows: “investment opportunities related to the product and our significant participation enables us to add value for our clients and the marketplace for liquid and illiquid GBTC shares.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

DeFi lending protocol Morpho has raised a $18 million round led by Andreessen Horowitz (a16z) and Variant via a native token sale in exchange for USDC.

According to an announcement, other investors in the round included Nascent, Semantic Ventures, Cherry Crypto, Mechanism Capital, Spark Capital, Standard Crypto and Coinbase Ventures. 

The round was raised while founder Paul Frombot was in his final year of studies at the Paris Polytechnique school with the deal closing on February 12, the day before he turned 21 years old. 

Morpho is a DeFi lending protocol built on top of existing protocols that moves loans from liquidity pools into a peer-to-peer mechanism to offer a higher yields for investors. 

The DeFi market, however, continues to reel from the shock of recent market events including the May collapse of the Terra blockchain. According to The Block research, the supply rate for TerraUSD (USDT) on Compound is at 2.07% compared to a high of 10.5% in December last year. 

Despite these conditions, Frambot says Morpho can weather the market.

“Morpho strangely fits the bear market conditions because it’s about native APY [annual percentage yield] improvements,” said Frambot in an interview. “The bear market is kind of better for us as although we might only be doing a 1% improvement of your APY, that really matters now that yields are down.” 

DeFi lending demand

While he recognizes that the demand is falling for DeFi lending, he said that the demand for a product like Morpho is as much as there is demand for the Ethereum lending protocol Compound, which Morpho is built on top of.

Compound’s total value locked, an indicator of the adoption scale by calculating the value of tokens locked, is currently at $2.7 billion compared to $9.1 billion at the end of last year, according to The Block research. 

Yet as an improvement layer for existing protocols, Morpho is not tied to one specific lending protocol. It’s currently looking at ways of integrating Aave and adding a corresponding blockchain network. 

It has also made steps to decentralize the protocol – part of the reason it chose two co-leads rather than one — by distributing non-transferable governance tokens to its users. These will have checkpoints, termed epochs and ages, where users can claim rewards and vote to refine the model of the protocol. 

The funding news follows recent venture capital moves in the DeFi lending space despite increased pressure on the space. Last month, Sequoia Capital India and Quona Capital co-led a $6 million seed round for lending protocol MoHash. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Venture capital firm Lightspeed announced today that it had secured over $7 billion in capital to be invested across four new funds aimed at “early-stage entrepreneurs across the globe,” including one focused on India.

The firm also unveiled an independent “crypto-native team” called Lightspeed Faction, which will be led by investors Sam Harrison and Banafsheh Fathieh. “Faction believes the innovation economy is at the precipice of a significant computing paradigm shift with blockchain companies leading,” the announcement stated.

The four funds revealed today are called Lightspeed Venture Partners XIV-A/B LP, Lightspeed Venture Partners Select V LP, Lightspeed Opportunity Fund II LP and Lightspeed India Partners Fund IV. The funds closed with $1.98 billion, $2.26 billion, $2.36 billion and $500 million, respectively.

The announcement comes amid a general slowdown in venture capital dealmaking, as the turbulence in equity markets and rising inflation have had ramifications in the private market. As The Block reported previously, May was the slowest month for crypto venture capital deals in the last six months. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Multicoin Capital, a crypto-focused venture capital firm, announced on Tuesday its third fund worth $430 million.

The firm began raising for the fund in the fourth quarter of last year and closed it in January of this year, Kyle Samani, co-founder and managing partner at Multicoin Capital, told The Block in an interview.

A good chunk of the fund’s capital comes from Samani and his co-founder, Tushar Jain. “Tushar and I are the largest LPs [limited partners] of the fund,” said Samani, adding that Multicoin’s other employees also participated — along with other unidentified institutional backers.

A third of the Multicoin Venture Fund III has already been invested, according to Samani. Multicoin plans to fully deploy the fund by the end of this year or the middle of the next year, he added. The fund writes checks in the range of $500,000 to $25 million for early-stage opportunities and up to $100 million or more for later-stage projects.

Like its previous funds, Multicoin plans to continue investing in startups that would increase web3’s adoption. “We are looking to back bold entrepreneurs who have a unique vision of how to apply crypto in different industries,” said Samani.

Multicoin’s current investments include Helium, Hivemapper, Delphia, Metaplex and FanTiger and it plans to continue investing in “pioneering” ideas, said Samani.

The venture capital firm isn’t worried about the current market downturn. “Absolutely nothing has changed for us,” said Samani. “We continue to invest aggressively.” He added that current lower valuations of startups are in fact beneficial for investors like Multicoin.

Multicoin’s third fund is a big jump from its $100 million second and $17 million first fund. Samani said the current assets under management of Multicoin is in “single-digit billions” of dollars.

Troubled crypto hedge fund Three Arrows Capital (3AC) was an investor in one of Multicoin’s funds, but Samani said 3AC’s situation has “absolutely no impact on us.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

On Tuesday, Celsius Network reclaimed a large portion of its collateral deposits that were locked in decentralized finance (DeFi) applications.

At around 7:50 a.m. ET, Celsius withdrew 400,000 stETH ($417 million) from Aave, a lending protocol where it had earlier parked the funds. The assets currently sit in the same wallet address that was used to transact with Aave.

This is according to on-chain data gathered from wallets that are widely believed to be owned by the lending company. In this case, the wallet in question is marked by Ethereum block explorer Etherscan as “Celsius Network: Wallet 11.” It tracks 24 addresses that are attributed to the company.

Facing a financial fallout caused by a sharp drop in crypto markets, Celsius has been winding down its DeFi positions amid reports that it is preparing for a potential bankruptcy filing. 

In addition to taking out stETH from Aave, Celsius repaid a loan of $63.5 million in USDC to Aave across three transactions. This reduced Celsius’ Aave debt to roughly $8.4 million.

The latest move follows the firm’s recent withdrawal of 6,083 wrapped bitcoin from Aave on Monday. Furthermore, last week it pulled $440 million in wrapped bitcoin from MakerDAO.

Currently, Celsius’ largest DeFi position consists of a collateral deposit of 10,000 wrapped bitcoin ($200 million) on Compound, according to on-chain data.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A new crypto venture capital fund called Protagonist has been launched with $100 million in funds.

Protagonist’s founders include Dylan Macalinao and Ian Macalinao of Saber Labs, a Solana-based cross-chain decentralized exchange, the firm announced on Tuesday. 

Based in Miami, Protagonist plans to invest in and incubate early-stage web3 protocols and startups across verticals, including gaming, infrastructure, security and privacy. Its current investments include Aptos, a new Layer 1 blockchain; Cardinal, a Solana-based NFT utility protocol; and Cogni, a digital banking platform.

“Protagonist is focused on investing in and incubating the core protocols that will support the emerging web3 ecosystems,” Macalinao said in a statement. “There will continue to be multiple thriving blockchain networks as each chain forms its own niche of applications and primitives in the next 20 years, and we are excited to play a big part in supporting these networks.”

Protagonist said it’s also developing and incubating its own protocols in-house.

The fund’s other founders include George Bousis and Harry Hurst, two serial entrepreneurs and angel investors. Bousis is the founder and executive chairman of Raise and Slide, a gift card, loyalty and payments company. Hurst is the co-founder and co-CEO of Pipe, a trading platform for recurring revenues.

It is unclear who Protagonist’s backers are and the fund didn’t disclose its investors. As for Saber Labs — which raised $7.7 million in funding last year — its backers include Chamath Palihapitiya’s Social Capital, Multicoin Capital and Jump Capital. Saber is currently the 11th largest Solana protocol with around $95 million in total value locked, according to data from DeFi Llama.

Protagonist’s launch comes during a market downturn and when venture capital funding has declined from its all-time highs earlier this year. The firm joins recent fund launches from Binance Labs, Fabric Ventures and Boldstart Ventures.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.