A British Virgin Islands court has recently issued an order to freeze approximately $1.14 billion in assets belonging to the co-founders of Three Arrows Capital (3AC), Su Zhu and Kyle Davies. The court order also includes Davies’ wife, Kelly Chen, prohibiting them from transferring or selling the assets, as reported by Bloomberg.
The liquidator of Three Arrows Capital, Teneo, estimates that the creditors are owed around $3.3 billion. The collapse of Three Arrows Capital, formerly one of the largest crypto-native hedge funds, in 2022 is attributed to a series of poor investments and the broader cryptocurrency market downturn.
Claims and Accusations
Teneo, the firm’s liquidator, stated, “The worldwide freezing order has been sought in connection with claims that are being pursued by the liquidators that allege, amongst other things, that the founders should be held responsible for causing 3AC’s position to deteriorate by an amount that is equivalent to the value of the freezing orders sought.”
Previously based in Singapore, Three Arrows Capital filed for bankruptcy in the British Virgin Islands. Teneo has accused the founders of failing to cooperate meaningfully in the liquidation process.
It is worth mentioning that in addition to the recent court order in the British Virgin Islands, the Singapore Court has previously issued a domestic freezing order.
Legal Troubles and Further Developments
Further legal troubles arose when Su Zhu was arrested in September at Singapore’s Changi Airport as he attempted to leave the country. Both Zhu and Davies were subsequently sentenced to four months in prison through a committal order for contempt of court.
According to the committal order, the former Three Arrow executives were issued subpoenas to cooperate with Teneo’s investigations and activities in unraveling the issues that led to the fund’s implosion.
As a consequence of these legal troubles, both Su Zhu and Kyle Davies have been banned by Singapore from conducting any regulated activity.
Zhu and Davies, once prominent figures during the bullish phase of the cryptocurrency market, have seen their reputations and fortunes suffer as risky practices within the industry were exposed. However, Su Zhu is expected to be released this month based on standard good behavior.
Looking ahead, the liquidators will continue to pursue all available opportunities to recover creditor assets worth billions in the coming months. The collapse of 3AC co-founded by Zhu and Kyle Davies in 2022 caused significant market losses and reduced investor sentiment, adding to a year filled with industry collapses.
Aside from Three Arrows Capital, the Terra Network and FTX also suffered similar fates, resulting in billions of losses. These events have put traders and investors on edge as the bear market continues to exert its influence on the industry.
