Recent court documents suggest Three Arrows Capital co-founders Zhu Su and Kyle Davies could be on the run from creditors after the collapse of the crypto hedge fund. A hearing to discuss the liquidation process was scheduled for 9 a.m. Eastern on Tuesday, but Zhu and Davies did not appear.
Three Arrows Capital Co-Founders On The Run?
Court documents filed on Friday allege that the Three Arrows Capital co-founders haven’t yet started to cooperate with the liquidation process “in any meaningful manner.” According to CNBC, lawyers who represent the hedge fund’s creditors say Zhu’s and Davies’ whereabouts are “currently unknown.” On Monday, the lawyers asked the court to keep the creditors’ identities anonymous.
As recently as March, Three Arrows Capital, also referred to as 3AC, had about $10 billion in assets under management. In July 1, the crypto hedge fund filed for Chapter 15 bankruptcy protection from U.S. creditors in the Southern District of New York. The bankruptcy filing came after plummeting cryptocurrency prices and the collapse of the original Terra stablecoin, which traded as UST, wiped out 3AC's assets.
Before the hedge fund filed for bankruptcy protection, a British Virgin Islands court ordered it to liquidate so that it could repay its debts. Three Arrows is now in bankruptcy court as angry lenders demand their money back. Advisory firm Teneo is tasked with managing the fund's liquidation, beginning with figuring out what's left.
Did The 3AC Founders Actually Participate In This Call?
The court filing from Friday states that Zhu and Davies supposedly took part in a Zoom call last week to talk about the first steps in preserving their assets. However, neither of them turned on their cameras or spoke during the call, leaving their mics muted. Their attorneys did all the talking, saying then that the 3AC co-founders "intended to cooperate."
Also during the meeting, representatives tasked with handling the liquidation process requested access to the hedge fund's offices and information about their digital wallets and bank accounts. However, the court filing states that access had not been granted as of Friday.
Additionally, in late June, the liquidators tried to visit Three Arrows' offices in Singapore and found them looking "vacant except for a number of inactive computer screens." The hedge fund's neighbors said they had last seen workers at the office in early June.
Warning That Three Arrows Capital's Assets May Have Disappeared
Russell Crumpler of Teneo, who's facilitating the bankruptcy process, warned in a sworn statement of a "real risk" that the fund's assets would disappear, "absent immediate authority to pursue discovery." He added that the risk was even greater because a significant portion of 3AC's assets were in cash and digital assets like cryptocurrencies and non-fungible tokens, which are "readily transferrable."
Additionally, a reputable NFT collector and investor said on Twitter that one of the hedge fund's NFTs was transferred to another wallet. Three Arrows' bankruptcy is sending ripple effects through the crypto industry, pushing other firms into bankruptcy.
Crypto brokerage Voyager Digital filed for Chapter 11 bankruptcy protection when the fund said it couldn't repay its $670 million loan from Voyager. Also facing steep losses due to 3AC's collapse are U.S.-based crypto lenders BlockFi and Genesis, crypto exchange FTX, and crypto derivatives platform BitMEX.