Fund Administration: Carried Interest Calculation on Illiquid Tokens

If a token trades at $10 but your allocation is locked for a year, it is NOT worth $10. Under ASC 820, you must apply a discount (DLOM). Valuing it at spot price inflates NAV and triggers fake performance fees.

Don't sell for cash. VCs should distribute the tokens directly to LP/GP wallets (80/20 split). The "Tax Event" happens at the block height of the transfer. This avoids slippage and aligns incentives.

Risk: GP gets $1M in tokens but owes $400k in cash tax. Solution: The LPA must allow the Fund to sell enough tokens to cover the GP's tax liability before interacting, ensuring solvency.

Keep liquid assets (BTC) separate from illiquid SAFTs. Create 'Side Pockets' so new LPs don't buy into locked gains, and departing LPs can't demand cash for assets that don't exist yet.

If you take carry in Year 1 (Bull) and lose it all in Year 2 (Bear), you owe the money back. Defense: Hold 30-50% of carry in an Escrow Buffer until the fund winds down.

Admins need data. 1. Tag Wallets (Inventory vs. Vesting). 2. Consistent Oracle Pricing (Midnight UTC). 3. Upload Legal Vesting Schedules to the admin portal.

Staking income increases NAV. Fix: Classify rewards as 'Unrealized' until claimed. Use a High-Water Mark strictly on Net Appreciation, not just yield.

3AC treated locked GBTC as cash equivalent. They leveraged against 'Paper Gains.' When liquidity vanished, they collapsed. Lesson: Liquidity is the only truth.