Founders 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 bankrupt crypto hedge fund Three Arrows Capital appear to be on the run from their creditors.

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Lawyers representing creditors have said the physical whereabouts of Zhu Su and Kyle Davies, who started Three Arrows in 2012, is “currently unknown,” ahead of a hearing scheduled for 9 a.m. ET Tuesday to determine next steps in the liquidation process. to discuss. The documents, filed Friday night, also claim that the founders have yet to begin cooperating “in a meaningful way” with the liquidation process. On Monday, the lawyers asked the court to keep the identity of the creditors anonymous.

Zhu and Davies did not respond to requests for comment.

Three Arrows, also known as 3AC, managed approximately $10 billion in assets in March. On July 1, the company filed for Chapter 15 bankruptcy with US creditors in New York’s Southern District after a cryptocurrency plunge and the collapse of the stablecoin project terraUSD (UST) wiped out its assets.

Prior to the bankruptcy filing, a British Virgin Islands court ordered the embattled fund to be liquidated to pay off its debts.

Now 3AC is in bankruptcy court, facing angry lenders who want their money back. Global consultancy Teneo was called in to help manage the liquidation, starting with trying to figure out what was left.

According to Friday’s court filing, Zhu and Davies, both former Credit Suisse traders, took part 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 the entire time, with all dialogue being conducted by a lawyer. Their lawyers said at the time that they “intended to cooperate”.

At the meeting, representatives aiding the liquidation demanded immediate access to 3AC offices and information about their bank accounts and digital wallets. According to the depot, that access had not yet been granted on Friday.

When the fund’s liquidators arrived at 3AC’s Singapore office in late June to attempt to meet with the founders, “the offices appeared to be empty except for a number of inactive computer screens.”

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

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

Teneo’s Russell Crumpler, who is charged with facilitating the bankruptcy process, said in an affidavit that there is a “real risk” that 3AC’s assets could disappear, “in the absence of “immediate authority to proceed with discovery” .

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

There are reasons for such concern. One of 3AC’s NFTs has been 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 assets. The attorneys also request that the court sue the founders or others who may have information about 3AC’s assets. This can be banks, crypto exchanges and counterparties.

The bankruptcy of 3AC has already had a major impact on the broader crypto market as many institutions had money with the company.

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

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

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