A court in the British Virgin Islands has issued an order freezing about $1.14 billion in assets belonging to the co-founders of Three Arrows Capital (3AC). The court has banned co-founders Su Zhu and Kyle Davies, as well as Davies’ wife Kelly Chen, from selling or transferring the assets, according to the firm’s liquidator Teneo, Bloomberg reported on Dec. 21.
Three Arrows Capital, formerly one of the largest crypto-native hedge funds, failed last year. Based in Singapore, the fund succumbed to a combination of ill-fated investments and the broader market downturn sparked by the collapse of Terra LUNA. Unable to fulfill margin calls from lenders, 3AC filed for bankruptcy in the British Virgin Islands.
Teneo, overseeing the closure process, claimed that founders Davies and Zhu aren’t cooperating, making the liquidation more complex. It estimated that 3AC creditors are owed about $3.3 billion in the aftermath of the hedge fund’s collapse.
“The worldwide freezing order has been sought in connection with the liquidators’ claims that the founders should be held responsible for causing 3AC’s position to deteriorate by an amount equivalent to the value of the freezing orders sought.”
Singapore Court Froze 3AC Assets
Apart from the recent court order in the British Virgin Islands, the Singapore Court issued a domestic freezing order earlier.
The developments follow Su Zhou’s arrest at Singapore’s Changi Airport in September as he tried to leave the country. Teneo said it received a committal order against Zhu after he failed to comply with a court order that urged him to cooperate with the liquidation process.
A committal order for contempt of court imprisoned Zhu for four months. Meanwhile, Davies is facing a similar order, but his location is unknown. Singapore’s monetary authority has banned both Davies and Zhu from conducting regulated investment activities within the country for nine years. In December, Zhu faced his first court questioning in Singapore court regarding the 3AC’s failure.
The collapse of 3AC and other bankruptcies, especially the FTX bankruptcy, triggered the crypto winter, wiping trillions off the market. Founders like Alex Mashinsky and Do Kwon are also facing scrutiny for their respective roles in the spat of crypto collapses.