The liquidator overseeing the winding up of Three Arrows Capital (3AC) is considering reclaiming approximately $1.2 billion from Digital Currency Group (DCG) and crypto lender BlockFi. These funds represent payments made by the hedge fund before the liquidation process began. A confidential report from Teneo, the liquidator, reveals potential claims exceeding $1 billion against DCG and its subsidiary, Genesis lending, which include preference claims and issues related to loan and security documentation. Additionally, the report highlights preferential payments of over $220 million to BlockFi. Preference claims arise if the hedge fund knowingly made payments that favored certain creditors over others. In this case, the claims pertain to transactions conducted by 3AC during the insolvency twilight zone that followed the collapse of the Terra Luna project in early 2022. Teneo declined to comment on its plans to recover the funds, while DCG and BlockFi have not responded to requests for comment. DCG, the parent company of CoinDesk and an investor in various crypto firms, could potentially face significant financial consequences if the clawback attempts are successful. The liquidator's move to reclaim funds from DCG and BlockFi underscores the complexities and legal considerations involved in the liquidation process. As the fallout from the collapse of the Terra Luna project continues to unfold, the liquidator seeks to rectify any preferential treatment and ensure a fair distribution of assets to all creditors. It remains to be seen how DCG and BlockFi will respond to the potential clawback actions. The outcome of this situation will have significant implications not only for the liquidation of Three Arrows Capital but also for the broader landscape of cryptocurrency lending and the responsibilities of investors and creditors in insolvency proceedings.