Investor Tensions Flare over Crypto Exchange Deribit’s Valuation

Tensions have flared between investor Michael Arrington and Three Arrows Capital over the latter’s arrangement to purchase a portion of the highly-successful crypto exchange, Deribit. 

Michael Arrington of Arrington XRP Capital argued, in a tweetstorm today, that Three Arrows Capital and QCP Capital of Singapore joined forces late 2019 to acquire 10% of Dutch-based crypto derivatives trading platform Deribit. 

2/ Derebit is based in Holland. Unregulated derivatives exchange. European law came knocking, so the company moved to Panama (but execs still in Holland). Absolutely killing it. Super profitable. Unregulated helps with friction of course.

— Michael Arrington (@arrington) June 10, 2020

The entity formed by Three Arrows Capital and QCP negotiated a $280 million valuation of Deribit. Arrington claims the companies then offered equity in Deribit with a valuation of $700 million.

An advisory firm, The Spartan Group, the company that introduced Deribit to Three Arrows Capital and QCP, got wind of the new valuation and, as they were not profiting from the differential and concerned about their reputation, became enraged.

Deribit was also unhappy about the deal as the valuation they had negotiated was less than half that at which Three Arrows and QCP were selling equity in it. The investors then lowered the evaluation to $350 million.

7/ wasn't getting a cut. Derebit hears about it all and freaks. And is also pissed they didn't get the $700m valuation. 3arrows/qcp back down and lower valuation to $350m or $375m

— Michael Arrington (@arrington) June 10, 2020

With Arrington now also claiming Three Arrows Capital are engaged in a new raise with a higher valuation, Three Arrows Capital’s CEO/CIO Su Zhu has fired back, saying:

“It is beneath Three Arrows Capital and QCP Capital to respond further to the tweets by Michael Arrington, but because silence is not an option in the face of unprofessional insinuations that have crossed the line into aspersions, we find it necessary to provide this clarity.”  

Zhu’s statement denies that Three Arrows and QCP resold or “flipped” Deribit equity, brokered Deribit equity, or engaged in any illegal securities offering.

The Three Arrow’s CEO labeled Arrington a “purveyor of libelous rumors,” insinuations and allegations.

Zhu’s rejection of Arrington’s tweets does not claim the company engaged in a re-evaluation of Deribit for new investors, however. It is also unclear whether such a reassessment would be unlawful.

Arrington himself acknowledged, albeit cheekily, saying:

“Pure capitalism, applied on shareholders of an unregulated financial entity, with a serious information deficit. It’s hard not to be impressed with what’s been accomplished here.”

Deribit continues to operate normally. Crypto Briefing reached out to Zhu for comment, and the CEO reiterated his publicly released statement.

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