In a high-profile auction at Sotheby’s auction house in New York, the digital art collection from the now-bankrupt cryptocurrency hedge fund, Three Arrows Capital, has been sold, generating significant buzz within the art and crypto communities. The auction featured 37 artworks, with the unique twist that bidders were able to pay for the artwork using cryptocurrency.
One of the standout pieces in the collection was Dmitri Cherniak’s “Ringers #879,” popularly known as “The Goose.” The artwork fetched an astonishing $6.2 million, making it the second-most valuable work of generative art ever sold, behind another of Cherniak’s pieces. Enthusiast @punk6529 emerged as the winning bidder, demonstrating the growing convergence between the worlds of art and digital assets.
This auction follows closely on the heels of a previous sale by Sotheby’s, where a smaller batch of non-fungible tokens (NFTs) owned by Three Arrows Capital was sold for $2.5 million. The hedge fund filed for bankruptcy in the United States last July, after crypto exchange Deribit claimed that it had failed to repay a significant debt of $80 million. Three Arrows Capital, once considered a leading player in the crypto market, now finds itself owing over $3 billion to creditors.
The downfall of Three Arrows Capital has been one of the most significant events in the crypto industry in recent years. In 2022, the firm experienced a severe financial crisis, resulting in one of the largest hedge fund trading losses in history. The company heavily relied on borrowing to finance its trading activities, which eventually led to its bankruptcy with $3.5 billion in creditors’ claims. Investigations following the firm’s collapse revealed that a substantial portion of its reported net asset value of $18 billion was derived from uncollateralized borrowing from various lending platforms.
The repercussions of Three Arrows Capital’s collapse were felt throughout the crypto market. The company’s borrowing strategy, which was prevalent across the industry, led to significant losses for numerous companies such as Blockchain.com, Voyager Digital, Genesis, BlockFi, BitMEX, and FTX. When Three Arrows Capital was unable to repay its lenders, it triggered a downward spiral in the crypto market, resulting in a market-wide decrease of more than $1 trillion since April 2022.
The recent auction at Sotheby’s signifies an attempt by Three Arrows Capital to liquidate its assets and repay its creditors. While the sale of the digital art collection may have brought some relief, the overall financial situation of the hedge fund remains precarious. The art auction served as a reminder of the intersection between art and cryptocurrency, highlighting the increasing acceptance and value of digital assets within the traditional art world.
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