Court Freezes Three Arrows Capital Founders’ Assets Worth $1 Billion

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A court in the British Virgin Islands froze around $1 billion in assets belonging to the founders of Three Arrow Capital, the crypto hedge fund whose sudden insolvency in June last year was one of the key events that triggered the so-called “crypto winter” of 2022.

In an emailed statement, the bankrupt fund’s liquidator Teneo said the court had issued an order preventing 3AC co-founders Su Zhu, Kyle Davies and Davies’ wife Kelly Chen from moving or selling assets worth $1.14 billion.

Teneo, which was ordered by the court to oversee the bankruptcy process, said the hedge fund owes around $3.3 billion to its creditors.

According to Teneo, creditors believe the founders must be held responsible for causing the hedge fund’s financial state to deteriorate “by an amount that is equivalent to the value of the freezing orders sought.”

A court in Singapore—where 3AC was founded and based—also ordered the freezing of Zhu and Davies’ domestic assets a day earlier, Teneo said.

Commenting on the court’s order, Teneo told Forbes: “The order is specifically designed to prevent the Founders and Ms. Kelly Chen from disposing of or otherwise dealing with assets in any way that might frustrate eventual enforcement by the liquidators. It also sends a clear signal to counterparties and affiliates of the Founders of Three Arrows as to their legal obligations and risks.”

In June last year, a British Virgin Islands court declared 3AC insolvent and ordered the liquidation of its assets. 3AC had invested $200 million in Luna, the companion token to the algorithmic stablecoin TerraUSD, which collapsed in May last year and wiped out $40 billion from the cryptocurrency market. Luna’s collapse caused the price of other major cryptocurrencies, including Bitcoin, to collapse, worsening 3AC’s situation. The final nail in the coffin for 3AC came when crypto broker Voyager Digital requested the repayment of $350 million worth of USDC stablecoin it had lent to the hedge fund.

In September, Zhu was detained by authorities in Singapore while he was trying to leave the country. His arrest came after repeated complaints by Teneo that he and Davies were refusing to cooperate with the liquidation process. Zhu faced a four-month jail sentence for his failure to cooperate with investigators but he is reportedly set to be released this month, owing to good behavior, Bloomberg reported. Zhu faced questioning from the hedge fund’s liquidators while appearing before a court in Singapore.

In a Singapore court filing in August, Davies declared he had renounced his American citizenship and therefore claimed he was not subject to the jurisdiction of U.S. courts. Davies holds a Singaporean passport and the country does not allow dual citizenship.

Three Arrows Founders’ $1 Billion in Assets Frozen by Court (Bloomberg)

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