The founders of the bankrupt Three Arrows Crypto Hedge Fund disappear

The entire stablecoin market is now worth over $ 160 billion.

Justin Tallis | AFP via Getty Images

According to recently filed court documents in New York, the co-founders of the bankrupt crypto hedge fund Three Arrows Capital appear to be on the run from their creditors.


Lawyers representing creditors have said the physical whereabouts of Zhu Su and Kyle Davies, who started the Three Arrows in 2012, are “currently unknown”, ahead of a hearing scheduled for Tuesday at 7 p.m. 9 ET to discuss the next steps in the liquidation process. The documents, which were filed Friday night, also claim that the founders have not yet begun cooperating with the liquidation process “in a meaningful way.” On Monday, lawyers asked the court to keep creditors’ identities anonymous.

Zhu and Davies did not respond to requests for comment.

Three Arrows, also known as 3AC, managed about $ 10 billion in assets as of March. On July 1, the company filed for Chapter 15 bankruptcy with U.S. creditors in the southern district of New York, following a dip in cryptocurrency and the collapse of the stablecoin project terraUSD (UST) wiped out its assets.

Prior to the bankruptcy application, a court in the British Virgin Islands ordered that the contested fund be liquidated to pay its debts.

Now 3AC is in bankruptcy law and facing angry lenders who want their money back. Global consulting firm Teneo was brought in to help manage the liquidation, beginning with trying to figure out what was left.

According to Friday’s lawsuit, Zhu and Davies, both former Credit Suisse traders, participated in a Zoom introductory call last week to discuss basic steps to preserve their assets. Neither of the founders turned on their video, and both remained silent throughout, with all dialogue conducted through a lawyer. Their lawyers said at the time that they “intended to cooperate”.

During the meeting, representatives who helped facilitate the liquidation demanded immediate access to 3AC offices and information about their bank accounts and digital wallets. On Friday, that access had not been granted, according to the case.

When the fund’s liquidators arrived at 3AC’s office in Singapore in late June to try to meet the founders, “the offices appeared empty except for a number of vacant computer monitors.”

The documentation notes that while the office door was locked, representatives could see unopened mail addressed to Three Arrows, which “appeared to have been pushed under the door or leaned against the door.” Neighbors in the surrounding offices said they last saw people at the 3AC office in early June.

Meanwhile, creditors are trying to figure out what assets are left.

Teneo’s Russell Crumpler, who has been tasked with helping ease the bankruptcy process, said in a statement that there was a “real risk” that 3AC’s assets could disappear, “in the absence of” immediate authority to proceed with the investigation “. .

“This risk is increased because a significant portion of the debtor’s assets consist of cash and digital assets, such as non-fungible cryptocurrencies and tokens, which are easily transferable,” Crumpler said in a statement.

There are reasons for such concern. One of 3AC’s NFTs was transferred to another crypto wallet, according to a well-known NFT collector and investor.

In Friday’s filing, creditors are asking the court to suspend 3AC’s right to transfer or dispose of any assets. The lawyers also ask the court to sue the founders or others who may have information about 3AC’s assets. This may include banks, crypto exchanges and counterparties.

3AC’s insolvency has already had a major impact on the broader crypto market, as many institutions had money with the company.

Digital asset brokerage firm Voyager Digital filed for Chapter 11 bankruptcy after 3AC was unable to repay about $ 670 million it had borrowed from the company. US-based crypto lenders Genesis and BlockFi, the cryptocurrency derivative platform BitMEX and crypto exchange FTX are also suffering losses.

SEE: Voyager Digital suspends withdrawals as Three Arrows Capital files for bankruptcy

Leave a Comment