Key Takeaways
- • U.S. Bankruptcy Judge Martin Glenn in Manhattan granted liquidators of Three Arrows Capital (3AC) authority on Tuesday, July 12, 2022, to claim the company's U.S.-based assets and issue subpoenas, according to Reuters.
- • The subpoenas can be served on co-founders Zhu Su and Kyle Livingstone Davies, whose whereabouts remain unknown, and on about two dozen banks and cryptocurrency exchanges that may hold information about 3AC's assets and transfers.
- • 3AC held $3 billion in assets as of April 2022, per the liquidators' court filing, down from roughly $10 billion reported earlier in 2022.
- • The liquidators argue the digital nature of the assets creates a real risk of removal unless a court order is in place; Zhu and Davies did not oppose the request.
- • 3AC's collapse has affected other crypto lenders, including Voyager Digital, which filed for bankruptcy after 3AC failed to repay a loan of about $650 million, and Blockchain.com, which lent $270 million to 3AC.
Summary
Liquidators for crypto hedge fund Three Arrows Capital (3AC) obtained U.S. court permission on Tuesday to issue subpoenas and assert claims over the bankrupt Singapore-based firm's assets, Reuters reported. U.S. Bankruptcy Judge Martin Glenn in Manhattan gave the liquidators authority to claim 3AC's U.S.-based assets and to subpoena the founders and roughly two dozen banks and crypto exchanges that may hold information about the fund's holdings and transfers.
At an emergency hearing, liquidators' lawyer Adam Goldberg told the court that the whereabouts of co-founders Zhu Su and Kyle Livingstone Davies remain unknown. Without their cooperation, the liquidators have been unable to establish a full picture of 3AC's assets and their locations. Goldberg said the digital nature of those assets creates a real risk that the founders or other parties could move them absent a court order, adding that a key purpose of the order is to put "the world on notice" that the liquidators control the debtor's assets. Zhu and Davies did not appear in bankruptcy court and did not oppose the subpoena request. Zhu posted on Twitter on Tuesday, his first post in almost a month, saying the liquidators had rebuffed a good-faith offer to cooperate.
According to the liquidators' court filing, 3AC held $3 billion in assets as of April 2022, after being reported to have about $10 billion in cryptocurrency earlier in the year. The fund filed for bankruptcy in the British Virgin Islands in late June 2022 following a sharp sell-off in digital currencies. The liquidators were appointed by a BVI court to wind down the company and pay its debts, and they filed a parallel bankruptcy case in Manhattan to shield its U.S. assets.
3AC's insolvency has spread stress across crypto lending. Voyager Digital filed for bankruptcy after 3AC failed to repay a loan of about $650 million in cryptocurrency, and Blockchain.com had lent $270 million to the fund, Reuters reported.
At an emergency hearing, liquidators' lawyer Adam Goldberg told the court that the whereabouts of co-founders Zhu Su and Kyle Livingstone Davies remain unknown. Without their cooperation, the liquidators have been unable to establish a full picture of 3AC's assets and their locations. Goldberg said the digital nature of those assets creates a real risk that the founders or other parties could move them absent a court order, adding that a key purpose of the order is to put "the world on notice" that the liquidators control the debtor's assets. Zhu and Davies did not appear in bankruptcy court and did not oppose the subpoena request. Zhu posted on Twitter on Tuesday, his first post in almost a month, saying the liquidators had rebuffed a good-faith offer to cooperate.
According to the liquidators' court filing, 3AC held $3 billion in assets as of April 2022, after being reported to have about $10 billion in cryptocurrency earlier in the year. The fund filed for bankruptcy in the British Virgin Islands in late June 2022 following a sharp sell-off in digital currencies. The liquidators were appointed by a BVI court to wind down the company and pay its debts, and they filed a parallel bankruptcy case in Manhattan to shield its U.S. assets.
3AC's insolvency has spread stress across crypto lending. Voyager Digital filed for bankruptcy after 3AC failed to repay a loan of about $650 million in cryptocurrency, and Blockchain.com had lent $270 million to the fund, Reuters reported.
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