Founders of The Cryptocurrency Hedge Fund 3AC on The Run as Crypto Market Collapses
According to court filings recently filed in New York, the co-founders of defunct and bankrupt cryptocurrency hedge fund Three Arrows Capital appear to be evading creditors.
Prior to a hearing that is slated for 9 a.m. ET on Tuesday to discuss the next steps in the liquidation process, attorneys for the creditors claim that Zhu Su and Kyle Davies, who founded Three Arrows in 2012, are “now unknown” as to their whereabouts physically. The documents, which were submitted Friday night, also claim that the founders have not yet “begun to cooperate in any significant manner” with the liquidation process. Attorneys asked the court to keep the names of the creditors private on Monday.
When contacted for comment, Zhu and Davies did not provide any.
Up until March, Three Arrows, better known as 3AC, managed around $10 billion in assets. Following the loss of all of its assets due to the crypto market collapses of the terraUSD (UST) stablecoin project and the collapse of the cryptocurrency market, the company filed for Chapter 15 bankruptcy protection from U.S. creditors in the Southern District of New York on July 1.
A British Virgin Islands court ordered the troubled fund to liquidate in order to pay off its debts prior to the bankruptcy filing.
Presently, 3AC is battling furious lenders who demand their money back in bankruptcy court. Teneo, a global advising business, was hired to assist with managing the liquidation, beginning with an effort to ascertain what was remained.
According to a court document filed on Friday, Zhu and Davies, both former traders for Credit Suisse, took part in an introductory Zoom call last week to go over the fundamentals of asset preservation. Both founders remained silent the entire time and neither turned on his video; all communication was done through counsel. At the time, their attorneys stated that they “planned to comply.”
Representatives assisting in the liquidation asked for rapid access to 3AC‘s offices and information regarding their bank accounts and digital wallets during the meeting. According to the complaint, that access has not been authorized as of Friday.
The premises at 3AC’s Singapore office were empty except from a few dormant computer screens when the fund’s liquidators had visited in late June in an effort to speak with the founders.
According to the petition, the reps could see unopened mail with the Three Arrows address while the office door was locked because it “looked to have been slid under the door or placed against the door.” The last time someone was seen in the 3AC office, according to neighbors at nearby offices, was in early June.
Creditors are in the process of figuring out what assets are still available.
There is a “real risk” that 3AC’s assets will vanish “without quick power to seek discovery,” according to Teneo’s Russell Crumpler, who was entrusted with aiding in the bankruptcy process.
In his statement, Crumpler noted that a sizable amount of the debtor’s assets are made up of cash and easily transferable digital assets, such as cryptocurrencies and non-fungible tokens.
There are causes for this worry. According to a well-known NFT investor and collector, one of 3AC’s NFTs was moved to another cryptocurrency wallet.
Creditors asked the court to revoke 3AC’s power to transfer or sell any assets in its filing on Friday. A subpoena for the founders or other people who could know information regarding 3AC’s assets is also being requested by the lawyers. This might apply to counterparties, banks, and cryptocurrency exchanges.
Due to the fact that so many institutions have money invested in the company, 3AC’s bankruptcy has already had a significant effect on the larger crypto market before the crypto market collapses.
Brokering of digital assets After 3AC was unable to repay Voyager Digital for the nearly $670 million it had borrowed from the company, Voyager Digital filed for Chapter 11 bankruptcy protection. Losses have also been reported by the American cryptocurrency lenders Genesis and BlockFi, the crypto derivatives marketplace BitMEX, and the cryptocurrency exchange FTX.