Three Arrows Capital (3AC), a crypto hedge fund that was recently ordered to liquidate its holdings following the impact of crypto contagion, is in the news once again as a report indicates its founders have disappeared. Meanwhile, one founder has reappeared on Twitter, indicating they are engaged with the courts.
According to a write-up in CNBC, 3AC lawyers claim they have no idea the location of founders Zhu Su and Kyle Davies.
Additionally, it is claimed that Su and Davies have not cooperated with the liquidation process.
While ostensibly based in Dubai, the liquidation process is taking place in the British Virgin Islands. A recent update to the company’s website indicates it is governed by BVI law.
3AC had invested in a wide range of crypto and blockchain firms, including DeFi. At one point, 3AC held over $10 billion in assets under management.
3AC had borrowed over $650 million from Voyager Digital. When the fund defaulted on the loan, Voyager was compelled to file for bankruptcy protection as operations were no longer sustainable.
The problems at 3AC were first revealed with Su posted a rather cryptic Tweet on June 14th that appeared to acknowledge their challenges.
We are in the process of communicating with relevant parties and fully committed to working this out
— 朱溯 (@zhusu) June 15, 2022
Earlier today, Su surfaced on Twitter, casting aspersion on the liquidators while indicating he is still very much engaged with the liquidation process. The Tweet also indicates the Monetary Authority of Singapore has been inquiring as to the status of 3AC.
Sadly, our good faith to cooperate with the Liquidators was met with baiting. Hope that they did exercise good faith wrt the StarkWare token warrants. pic.twitter.com/CF73xI8r6n
— 朱溯 (@zhusu) July 12, 2022
Update: Reuters is reporting that liquidators have received permission from the courts in the US to issue subpoenas to the founders, around two dozen banks, and crypto exchanges that may have information on assets. As neither founder appeared before the tribunal regarding the liquidation process, the request for subpoenas was unopposed.
Adam Goldberg, a lawyer for the liquidators, stated:
“A key part of this order is to put the world on notice that it is the liquidators that are controlling the debtor’s assets at this stage.”
Goldberg apparently also indicated that the digital nature of the assets added risk for the potential for them being pilfered unless halted by the courts.
The report indicated that while 3AC had $10 billion in assets at the beginning of the year, as of April this amount had dropped to $3 billion.
Simultaneous to the case in BVI, a bankruptcy case has been filed in Manhattan to guard assets in the US.