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Lawyers interpret the three Arrows liquidation: The three arrows and creditors at the same time proposed liquidation

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A British Virgin Islands court has given liquidators explicit authority to sell cryptocurrencies into US dollars, USDC or USDT, and another sell-off could be in the offing.

Original post by Wassies

0x9F, BlockBeats

This article is from lawyer Wassies on his personal social media platform, translated by BlockBeats:

"Three Arrows Capital liquidated in British Virgin Islands" made headlines everywhere. But what does that really mean? What about the Chapter 15 bankruptcy protection sanjian has just filed in the US? Let's talk about this article.

Judging from court orders circulating online, it appears there are two applications to liquidate Three Arrows capital in the British Virgin Islands.One application was filed by Three Arrows itself for liquidationThe other is a provisional liquidation led by Three Arrows' creditors.

What is the difference between liquidation and provisional liquidation?

The liquidationIs to appoint a liquidator to realize all of the company's assets and distribute them to creditors. That was the end of the company.

Provisional liquidationA temporary procedure whereby a creditor may appoint a professional person to take charge of the company on an interim basis until the liquidation petition (which is an application to the court to liquidate the company) can be heard.

A provisional liquidation is usually done to preserve a company's assets. This is sought by creditors if it becomes clear that the company is insolvent and there is a real risk that assets will be dissipated, making it necessary to temporarily change the management of the company. I was surprised that the liquidation order came so quickly, becauseThere is usually a delay between a liquidation application and a liquidation order (which is why Three Arrows' creditors filed for provisional liquidation).

As it turns out,The reason it happened so quickly... Three Arrows filed for liquidation themselves!Usually not so fast, because the company may want to resist the liquidation filing, arguing that it is not insolvent because it has access to new capital, etc. Things are very different here. Sanjian said it should liquidate the company and put forward its own application for liquidation.There is no dispute that liquidators should be appointed; the only dispute is the choice of liquidators.

Why does the choice of liquidator matter?

When liquidating a company, the liquidator should be impartial and act in the best interests of stakeholders, but there are obvious advantages to having a relationship with the appointed liquidator. For example, if Arrow appointed a liquidator rather than one nominated by creditors, arrow may find it easier to talk to the liquidator and may be more sympathetic to claims against directors and others.

Comically, Zhu Su (pictured) tried to claim compensation from Three Arrows as a creditor. I am awed by this shameless act. Fortunately,A liquidator of the creditors' choice is appointed.

Who is the liquidator?

Teneo. They are a reputable advisory firm that recently acquired KPMG's British Virgin Islands restructuring practice and Deloitte's UK restructuring practice. Both liquidators previously worked for KPMG.

Their next step will be to assess three Arrows' existing assets and the total amount of claims against them. They will also assess claims against other parties, including directors Zhu Su and Kyle Davies. A creditors' meeting should take place soon.

What is there to talk about in Chapter 15?

Chapter 15 is a recognition process in which a foreign representative (in this case the liquidator) may seek recognition of the BVI's restructuring process in the United States.

This is important in cross-border bankruptcies. becauseThree Arrows' assets are not in the British Virgin Islands. They are likely to be held in bank accounts in other jurisdictions, such as the US or Singapore (where they operate).If a court order in the British Virgin Islands is not recognised in the US, then it is worthless because the liquidator needs to be able to go to the US bank holding three Arrows assets and say to them: "Hand all this stuff over, we are the official liquidators."

I hope that the liquidators will in due course apply for recognition of the liquidation of the British Virgin Islands in Singapore and possibly other jurisdictions.

Now what?

Sit down and wait. The liquidator will open all the accounts of Three Arrows and try to find out what happened. After that, they will talk to creditors, file claims and fairly distribute the remaining assets of Three Arrows to creditors.

Oh by the way,The BVI courts also gave liquidators explicit authority to sell cryptocurrencies into US dollars, USDC or USDT(unfortunately no UST), so maybe another sell-off is coming? If there's anything left of the three arrows.

This article is not financial advice.