The British Virgin Islands court has taken a significant step by freezing assets exceeding $1 billion belonging to the founders of 3AC, effectively preventing them from transferring or selling their assets. This action stems from the bankruptcy of the crypto hedge fund, and the appointed liquidator, Teneo, revealed that creditors are owed approximately $3.3 billion. Teneo emphasized that this recent court decision serves as a clear message to counterparties and affiliates of Three Arrows regarding their legal responsibilities and associated risks.
Notably, the freezing order extends beyond the founders, encompassing even Kelly Chen, the wife of Kyle Davies, co-founder of Three Arrows Capital. This inclusion reflects the liquidators’ commitment to comprehensively understanding the activities of founders and their associates. The liquidator, Teneo, affirmed that the founders and Chen have the option to contest the orders and proceedings by appearing before the courts in the British Virgin Islands or Singapore.
Teneo, having received approval from the Singapore High Court, is actively investigating 3AC’s local assets, including bank accounts, real estate, and cryptocurrencies. The liquidator has taken control of a minimum of $40 million of Three Arrows Capital’s assets, although this constitutes only a fraction of the total owed to creditors.
3AC’s Woes Pile Up
The turmoil for 3AC began in mid-2022 during the Terra blowup, as losses from investments in Terra’s native token Luna, combined with crypto market turbulence, proved catastrophic for numerous lenders, including 3AC. Before their foray into the crypto market, 3AC co-founders Davies and Zhu had faced criticism from banks and other traders, according to reports. In previous interviews, the co-founders acknowledged losing $200 million in investments but asserted their enduring belief in cryptocurrencies.
The bankruptcy filing by the firm in July 2022 marked a pivotal moment, exposing the challenges faced by entities in the crypto space. Further complicating matters, co-founder Zhu was arrested on September 29 for non-compliance with a court order mandating cooperation with the liquidation process. This development adds a legal dimension to the ongoing saga surrounding the downfall of 3AC and its founders.