Three Arrows Wanted a $100M NFT Collection. Instead, It’s Worth Less Than $5M

The company had dreams of institutional interest in non-fungible tokens. But as the firm declares bankruptcy, the NFT collection is worth a paltry sum. One investor has written off its entire investment in the "Starry Night" fund.

AccessTimeIconJul 8, 2022 at 4:18 p.m. UTC
Updated Jul 8, 2022 at 4:54 p.m. UTC

At the height of last summer’s non-fungible token (NFT) mania, Three Arrows Capital – then a behemoth managing tens of billions of dollars – partnered with pseudonymous non-fungible token collector Vincent Van Dough to launch Starry Night Capital, an NFT fund that aimed to raise $100 million.

But in the crypto-markets wreckage of 2022 that has Three Arrows looking down the barrel of a court-ordered liquidation, the Starry Night fund is worth a fraction of what it aimed for and its only institutional investor has declared a total write-off of its investment.

While Three Arrows made an effort to obscure its relationship with its over-the counter trading desk TPS Capital via a complex paper trail, the relationship between Three Arrows and Starry Night has never been much of a secret.

According to estimates prepared by DappRadar using on-chain data, Starry Night’s wallet has an estimated net worth of $4.2 million. CoinMetrics researcher Kyle Waters said the fund spent $21 million amassing this portfolio, with numerous blockbuster purchases sometimes in the millions of dollars. At one time, Waters later tweeted, it amounted for 10% of NFT marketplace SuperRare’s volume.

Starry Night’s Vincent Van Dough didn't respond to a request for comment.

Now, the fund has been moved from its prior home on SuperRare to a new wallet, tweeted one prominent NFT collector, leading to speculation that a fire sale might be in the works.

Total write-off

Amid the bull market hype of last summer’s NFT rush, Three Arrows and Starry Night got KR1, a U.K.-based listed digital assets fund, to invest $5 million into the fund.

According to a June 30 earnings release from KR1, its $5 million subscription into Starry Night Capital was done via a purchase of "Class Starry Night Shares" in British Virgin Islands-registered Three Arrows Fund Ltd. A search of corporate registries in Singapore, BVI and the Cayman Islands showed no results for an entity named Starry Night.

In a recent earnings statement, KR1 said it had impaired the value of these Starry Night Shares by 100%, writing off its value entirely from its books. A spokesperson for KR1 declined to comment further. The company’s stock, listed on the Aquis exchange, has declined by nearly 80% on the year.

Pressure on the NFT market

As bankruptcy proceedings begin in BVI and Starry Night’s value is assessed, the question is for how much these NFTs can be sold.

The DappRadar valuation of the Starry Night portfolio at $4.2 million notwithstanding, even that diminished level might not be reliable – with volatile cryptocurrency markets still recovering from their recent crash.

Data from NonFungible shows that in the last three months, the secondary sales market for NFTs has been obliterated compared with when Starry Night was amassing its collection last year.

On Aug. 12, the NFT market had peaked with 746,000 weekly primary NFT sales, according to NonFungible, and approximately 506,000 secondary sales.

But those were bull market times. Fast forward to now, and the primary and secondary markets have flipped in prominence. The secondary market is down to around 134,000 weekly sales while the primary market has 60,000. That suggests a grand unloading.

The average value of an NFT is down 68% in the last three months to $628, according to NonFungible’s data tracker. To underscore the data point, former Twitter (TWTR) CEO Jack Dorsey’s $2.9 million first tweet is now worth just $280.

A date has not been set by the court for a bankruptcy hearing for Three Arrows, according to court documents retrieved by CoinDesk.

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