After the founders of a crypto firm called Three Arrows Capital purchased a coveted Dmitri Cherniak NFT for $5.8 million in August 2021, they kept a printed version of the digital artwork in their Singapore offices — behind the billiards table and slightly left of the coffee creamer.

That carefree attitude appeared to have extended to the doomed hedge fund’s portfolio, as the world realized last year when Three Arrows Capital declared bankruptcy and its founders, Kyle Davies and Su Zhu, hightailed it to Bali where extradition requests from the United States are largely powerless. Creditors were left holding the bag, demanding nearly $3.5 billion in payments. A consultancy named Teneo became the company’s liquidator and decided to sell everything, including the NFTs, to make a small dent in the deficit.

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On Thursday evening, some 40 digital artworks were offered in the second part of Sotheby’s “Grails” sale, dedicated to works owned by 3AC. Thursday’s sale ultimately raised just under $11 million with buyers’ fees, more than double the sale’s high estimate of $4.8 million. The centerpiece of the auction was Cherniak’s prized artwork, “Ringers #879 (The Goose),” now displayed on a proper gallery wall instead of a countertop beside the Nespresso machine. The generative artwork, which seems to defy the randomized logic of its algorithm by resembling a bird, sold for $6.2 million after nearly 10 minutes of lively bidding to 6529 NFT fund, which belongs to @punk6529, a frequent buyer of blue-chip NFTs who hides his identity behind a Twitter handle.

Two Sotheby’s employees said it was the youngest audience they had seen in the salesroom, with many first-time bidders in their 20s and 30s raising paddles for works that ranged from a few thousand dollars to six figures. One buyer wore a linen jacket and beige Birkenstocks as he competed for “Archetype #46” by Kjetil Golid. He ultimately won the artwork for $30,480. He declined to comment on his purchase to ARTnews, saying that he “preferred to stay on the DL.”

For dealers who attended the sale curious to see if it would draw crowds, they left the auction feeling satisfied. “The energy in the room was very infectious,” Ariel Hudes, head of Pace Verso, told ARTnews. “You can feel this is a younger market.”

The last time that Sotheby’s held a major auction for NFTs was more than a year ago, when an ill-fated flop of a $30 million CryptoPunks sale ended with confusion, recriminations and a bummer party. That was a distant and repressed memory as collectors gathered like moths to the flames of a fire sale unlike anything seen since Elon Musk raided Twitter HQ’s offices and sold the furniture in January.

Nostalgia seemed to drive sales as collectors sought mementos from the $3 trillion supercycle in crypto that has since lost nearly two-thirds of its value because of economic headwinds, federal regulations, and associations with organized crime. Even the auction’s subtitle read like a mocking reference to the great crypto calamity. Was the collection “iconic” because of the important artworks for sale, or was it “iconic” because of the scandalous implosion of its corporate benefactor?

Michael Bouhanna, Sotheby’s head of digital art and NFTs, insisted that his auction was about quality. “It’s very rare to get the opportunity to purchase these works,” he told ARTnews, though admitting “provenance plays a role.”

The notorious provenance behind these NFTs undoubtedly captivated the crypto whales eager to spend their remaining coins on CryptoPunk collectibles and generative artworks by Tyler Hobbs, Erick Calderon, Jeff Davis and others. Bouhanna said that there were hundreds of advanced bids before the auction began with nearly every lot exceeding or falling firmly within the estimate.

One might wonder if the auction was designed to overperform, especially during a sleepy market when most serious collectors were enjoying aperitifs at Art Basel in Switzerland. 

A yellow, white, and black arrangement of circles and shapes that resembles a bird.

Ringers $879 (The Goose). Dmitri Cherniak, 2021.

Courtesy of Sotheby’s

Information found on Sotheby’s website by using an emulation technique to inspect elements of the company’s bidding system indicated that the auction’s top lot — “The Goose” — was posted with a $2.7 million bid before bidding even began. That figure, just a few hundred thousand shy of the item’s high estimate, practically guaranteed the evening’s success from the jump rather than indicating true market demand. Someone close to the auction, who requested anonymity to discuss internal matters, noted the information to ARTnews, however, a Sotheby’s spokesman said the number didn’t have any special meaning.

“I’m not worried that people are not necessarily on site for the auction,” Bouhanna said. “For the ones who want to participate, they have already participated online. It won’t affect the auction’s success because we already have 20 people registered to bid in the room and it will be fully backed with people who want to watch.”

There was plenty of active bidding in the saleroom, more than previously seen during the spring season’s large modern and contemporary art sales, where collectors have been preferring to do business over the phones. For example, a Texas couple traveled to Manhattan to bid in person, spending nearly $610,000 on “Fidenza #216” by the generative artist Tyler Hobbs.

Artists will receive royalties from the sales, according to a Sotheby’s spokesperson, and there were several artists who personally attended the auction. Cherniak was seated toward the back, watching as “The Goose” climbed into the millions. When it was originally sold to Three Arrows Capital in 2021, the NFT opened doors for the Canadian artist, including meetings with museum directors and a chance to quit his day job.

But he wasn’t exactly thrilled to see the artwork in an auction with CryptoPunks and other collectibles that aren’t so related to the generative art he produces. “I have been critical of any projects that try to lump everything together,” he said. “My ideal circumstance is that ‘The Goose’ would never be sold. It would be enjoyed or donated to a museum.”

But the NFT was ultimately in the liquidator’s wallet and in the auctioneer’s hands. “The reality is that this is how our society works,” Cherniak added.

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