Key Takeaways
- • Three Arrows Capital (3AC) co-founders Zhu Su and Kyle Davies are reportedly unreachable, with creditors' lawyers stating their whereabouts are "currently unknown" ahead of a Tuesday liquidation hearing in New York, according to court documents filed Friday.
- • The founders have not cooperated "in any meaningful manner" with liquidation, per the filing, and have not granted liquidators access to offices, bank accounts, or digital wallets.
- • 3AC, which managed about $10 billion as recently as March, filed for Chapter 15 bankruptcy protection on July 1 in the Southern District of New York after a crypto plunge and the collapse of the TerraUSD (UST) stablecoin.
- • Teneo's Russell Crumpler warned of a "real risk" that 3AC's assets could disappear, noting that much of the holdings are readily transferable cash and digital assets.
- • Fallout extends across the crypto sector, including Voyager Digital's Chapter 11 filing after 3AC failed to repay roughly $670 million it borrowed, with Genesis, BlockFi, BitMEX and FTX also exposed.
Summary
Co-founders Zhu Su and Kyle Davies of failed crypto hedge fund Three Arrows Capital appear to be evading creditors, according to court documents filed Friday evening in New York. Lawyers for the creditors said the physical whereabouts of Su and Davies, who started the firm in 2012, are "currently unknown." The filing, ahead of a 9 a.m. ET hearing on Tuesday to discuss next steps in the liquidation, alleges the founders have not cooperated with the process "in any meaningful manner." Su and Davies, both former Credit Suisse traders, did not respond to requests for comment. Creditors had asked the court to keep their identities anonymous.
Three Arrows, also known as 3AC, managed about $10 billion in assets as recently as March. The firm filed for Chapter 15 bankruptcy protection from U.S. creditors on July 1 in the Southern District of New York, after a plunge in cryptocurrency prices and the collapse of the TerraUSD (UST) stablecoin project wiped out its assets. Before that filing, a British Virgin Islands court ordered the fund to liquidate to repay its debts.
According to the filing, the founders participated in an introductory Zoom call last week with their counsel, with neither turning on video and both remaining muted. Their lawyers said at the time that they "intended to cooperate." Liquidators requested immediate access to 3AC's offices and to bank account and digital wallet information, but as of Friday that access had not been granted. When liquidators visited the Singapore office in late June, it appeared vacant except for inactive computer screens, and unopened mail addressed to the firm was visible behind a locked door. Neighbors said they had last seen people there in early June.
Teneo's Russell Crumpler, tasked with facilitating the bankruptcy process, said in a sworn statement that there is a "real risk" assets could disappear absent immediate authority to pursue discovery, given that a substantial portion consists of cash and transferable digital assets, including cryptocurrencies and NFTs. One of 3AC's NFTs has already been moved to another crypto wallet, according to a well-known NFT collector and investor. Creditors have asked the court to suspend 3AC's right to transfer or dispose of assets and to subpoena the founders and third parties such as banks, crypto exchanges and counterparties.
3AC's insolvency has rippled across the crypto market. Digital asset brokerage Voyager Digital filed for Chapter 11 bankruptcy protection after 3AC could not repay roughly $670 million it had borrowed. U.S.-based lenders Genesis and BlockFi, derivatives platform BitMEX and exchange FTX are also absorbing losses.
Three Arrows, also known as 3AC, managed about $10 billion in assets as recently as March. The firm filed for Chapter 15 bankruptcy protection from U.S. creditors on July 1 in the Southern District of New York, after a plunge in cryptocurrency prices and the collapse of the TerraUSD (UST) stablecoin project wiped out its assets. Before that filing, a British Virgin Islands court ordered the fund to liquidate to repay its debts.
According to the filing, the founders participated in an introductory Zoom call last week with their counsel, with neither turning on video and both remaining muted. Their lawyers said at the time that they "intended to cooperate." Liquidators requested immediate access to 3AC's offices and to bank account and digital wallet information, but as of Friday that access had not been granted. When liquidators visited the Singapore office in late June, it appeared vacant except for inactive computer screens, and unopened mail addressed to the firm was visible behind a locked door. Neighbors said they had last seen people there in early June.
Teneo's Russell Crumpler, tasked with facilitating the bankruptcy process, said in a sworn statement that there is a "real risk" assets could disappear absent immediate authority to pursue discovery, given that a substantial portion consists of cash and transferable digital assets, including cryptocurrencies and NFTs. One of 3AC's NFTs has already been moved to another crypto wallet, according to a well-known NFT collector and investor. Creditors have asked the court to suspend 3AC's right to transfer or dispose of assets and to subpoena the founders and third parties such as banks, crypto exchanges and counterparties.
3AC's insolvency has rippled across the crypto market. Digital asset brokerage Voyager Digital filed for Chapter 11 bankruptcy protection after 3AC could not repay roughly $670 million it had borrowed. U.S.-based lenders Genesis and BlockFi, derivatives platform BitMEX and exchange FTX are also absorbing losses.
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