In many of the recent insolvencies of digital asset companies, liquidators have been appointed over companies in which digital assets have been fraudulently transferred from wallets controlled by an insolvent company into other unidentified wallets in foreign jurisdictions.

The anonymity of cryptoassets causes serious difficulties for insolvency practitioners in identifying the third parties who received funds and the location of the digital wallets.

Our analysis of a recent court judgment in the ongoing liquidation of the high profile crypto-asset hedge fund Three Arrows Capital is by Nicholas Brookes and Romauld Johnson, part of Ogier's BVI team representing the joint liquidators.

Read our update on crypto insolvency issues from Three Arrows, which illustrates implications of the judgment including

Domestic Procedures

On 28 March 2024, the BVI Court granted the Joint Liquidators of Three Arrows Capital Ltd (in liquidation) ("3AC") sanction to make an interim distribution of up to US$100 million of 3AC's assets to its creditors in BVIHC(COM)2022/0119 Russell Crumpler and Christopher Farmer (as Joint Liquidators of Three Arrows Capital Ltd (in Liquidation)) v Three Arrows Capital Ltd (in Liquidation).

Can directors or shareholders be required to contribute to the liquidation estate?
What liability can directors or other officers attract in respect of an insolvent company?

What categories of transaction can be avoided or set aside?
Who is responsible for seeking orders to set aside such transactions?

This Q&A on avoidance transactions is part of a series on restructuring and corporate recovery jurisdiction in the British Virgin Islands.(1)

What are the principal forms of security in the British Virgin Islands in respect of movable and immovable property?
What is the effect on secured creditors of the commencement of an insolvency procedure?

To what extent do courts assist overseas appointees (through recognition) and in what circumstances?
Are there any limitations typically imposed in respect of recognition of an overseas appointee?

What are the principal insolvency procedures for companies in the British Virgin Islands?
Are any of the procedures available on a provisional basis?
What requirements should be satisfied for the procedures to be pursued?

International guidelines on cross-border insolvency matters have recently been adopted by the BVI courts. The Judicial Insolvency Network guidelines – drafted in 2016 by ten insolvency judges from international jurisdictions, including a BVI Commercial Court Judge – aim to create co-operation and communication between courts on cross-jurisdiction proceedings, and to minimise the time and expense involved in litigation.