Singapore judge ruled that the country’s court is the appropriate venue to hear the $140M dispute involving DeFiance Capital against Teneo. The decision delivered a big blow to Teneo, who were official liquidators for the bankrupt Three Arrows Capital (3AC) estate opposed to the move.
The dispute arises from $140 million in assets that DeFiance Capital managed. The fund runs autonomously from 3AC, though a constituent of its corporate structure.
A review of submissions to the court captures the liquidators’ argument that the funds form part of the 3AC estate and deserve distribution to the creditors. DeFiance Capital dismisses the ground, stating that the $140M assets deserve separate treatment and should be reverted to the investors.
The liquidators opposed the move to hold the trial in Singapore, instead proposing the British Virgin Islands as the domicile of the fund structure. DeFiance Capital opposes such proposals, instead indicating Singapore is the suitable venue since the founde,r Arthur Cheon,g and investors to the funds are residents.
Singapore Ultimate Venue to Hear $140M Legal Dispute
Singapore-based Judge Chua Ming held that the legal dispute pitting DeFiance Capital and Teneo should be heard within the country’s court. A review of the court notes from the August 8 hearing reveals the judge’s reasoning that the crypto assets disputed are in DeFiance Capital’s possession and also held in Singapore.
Judge Ming dismissed the liquidators’ argument that cryptocurrencies know no exact location, indicating that only the trust was established in Singapore. The judge pointed to the evidence submitted to suggest that the extent of Cheogn’s control over the disputed funds is subject to serious questions warranting trial and making Singapore the appropriate venue where he is a resident.
DeFiance Capital founder Arthur Cheong hailed the Singapore judge’s ruling, indicating that it vindicates the position. He welcomed the order as a catalyst to pursue the next stage, seeking to address the substance of the disagreement with the 3AC estate liquidators.
DeFiance Capital attorney Blossom Hing from the Drew and Napier firm welcomed the Singapore Court’s decision labeling it as the desired ruling given that the essential evidence is within the county. He indicated that the Singapore judicial system is reliable in examining the evidence available justly and efficiently.
3AC co-founder Su Zhu, who clarified not directly engaged in the dispute, faulted Teneo for its argument that portrays attempts to seize funds belonging to other investors. He expressed optimism that the due process of the law will facilitate DeFiance Capital and Starry Night Capital, identified as investors, to retain ownership of the contested assets.
The same dispute is subject to court proceedings in the British Virgin Islands, though the court has yet to deliver its pronouncement. If the court indicates that the BVI is also suited to hear, the case will lead to parallel proceedings with the potential to have contrasting judgments regarding a single issue.
The parties dispute the exact value of the assets comprising $115M crypto and NFTs in DeFiance Capital’s possession. Also disputed are 69 SAFE/SAFT agreements identified for future equity and tokens, though signed in 3AC’s name.
Teneo values the amount as $141M, while DeFiance Capital estimates the assets slightly above $120M. Cheong observed that the basis for divergence in the estimates arises from the difficulty of valuing such agreements.
DeFiance Capital’s Shift from 3AC
DeFiance Capital journey traces to August 2020 though to operate within the bankrupt 3AC structure with a distinct share class. Cheong submitted that DeFiance ran autonomously with its own offices and employees. It exercised autonomy in its investment decisions, though it readily paid management fees to the 3AC as outlined in the initial agreement.
Cheong revealed the basis of separation as a February 2022 proposal by 3AC co-founders to relocate to Dubai. He declined the request and chose to move DeFiance Capital from the 3AC structure, resulting in two Singapore-based firms in May.
Cheong revealed that DeFiance Capital advanced a $35 million loan denominated in stablecoin USDC to the embattled firm in May 2022. The fund indicated that it lays a regular creditor claim owing to the loan that does not count in the legal dispute.
Court filings indicate that the 3AC co-founders authorized legal rights to the DeFiance Capital in June, a decision tied to creating two companies. The decision prompted the transfer of DeFiance Capital’s crypto and NFT assets with an exclusion of the loaned funds into one of the entities that run outside the 3AC structure. However, the 3AC sought bankruptcy filing before fully completing the migration.
The legal dispute with 3AC liquidators is not holding back Cheong, who is returning to the game. He fundraised $20 million for the DeFiance Liquid Venture Fund, which will run separately from the entities involved in the legal dispute. The fund started investing in liquid tokens at the onset of 2023.