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Court Locks 3AC’s $1B Assets In Legal Showdown

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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.

Embattled 3AC CEO Zhu Su Make His Comeback Accusing Liquidators of ‘Baiting’

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Zhu Su, the co-founder of Three Arrows Capital or 3AC, finally reappeared on Twitter after a month-long break that spurred intense speculation on his whereabouts.

In the tweet, Zu spoke out against court paper filings accusing him and co-founder Kyle Davies of failing to cooperate with the liquidators.

The screenshots contained emails addressed to Russell Crumpler, senior director of the advisory firm Tenio that has been tasked to oversee the hedge fund’s liquidation.

The mail which appeared to come from 3AC attorneys, Advocatus Law LLPAs countered the allegation by saying that the liquidators trap the duo into discussions without sending a prior notice.

“It has come to our client’s attention that you have made an application in the United States of America, alleging that they have not been cooperating with you in any meaningful way, and detailing some of the discussions, and the manner in which we had them, on 8 July 2022.”

“It now appears clear why your Singapore solicitors were keen to ask if the discussions were on a ‘without prejudice basis. It was to use the discussions in Court filings without notice to our clients.” wrote Christopher Anand Daniel, managing partner of Advocatus.

3AC’s lawyers also claimed that the founders and their families “have received threats of physical violence.” 

3AC On Liquidators’ Flip-Flop Of StarkWare Token

The second screenshot deals with the firm’s relationship with the Israeli crypto startup StarkWare of which Zhu and Kyle are both investors and stakeholders.

The legal counsel expressed concern over the liquidators’ failure to exercise StarkWare’s token purchase offer that had been agreed upon causing “the company to lose substantial value”.

“Our clients, as you know, besides being former directors of the company, are also investors, and shareholders of the company. One of our clients, Mr. Zhu Su, is also a creditor,” Daniel wrote.

“In these capacities, they are extremely concerned by the Liquidators’ failure to exercise StarkWare’s token purchase offer [“StarkWare Exercise”], a fact that was confirmed by you in the call on 8 July 2022.”

Earlier this month, the Singapore-based hedge fund filed for Chapter 15 bankruptcy to protect against assets seizure from creditors in the US.

Russell Crumpler and Christopher Farmer of Teneo, previously claimed they were unable to get in touch with Zhu and Davies leading to rumors that the two were on the run from authorities.

As noted by Reuters, the court scheduled an emergency hearing on Tuesday, July 12th to address 3AC’s crisis. Now as per the 3AC mail, the co-founders won’t be attending that call.