Three Arrows founders shoot through

Company News

by Glenn Dyer

The co-founders of failed crypto hedge fund Three Arrows Capital (3AC) appear to be on the run from creditors, according to court documents filed in New York late last week.

Lawyers representing 3AC’s creditors say the physical whereabouts of the duo, Zhu Su and Kyle Davies are “currently unknown.” The court filing also alleges that the founders have not yet begun to cooperate with the liquidation process “in any meaningful manner.”

But other reports say Zhu has been tweeting that he and Davies didn’t co-operate because they feared they were being “baited’ into incriminating themselves.

3AC managed about $US10 billion in assets as recently as March 31 and its failure has triggered billions of dollars of losses across the crypto world.

Its collapse is looking like a central failure in the current winter freeze across cryptocurrencies.

It triggered digital asset brokerage Voyager Digital filing for Chapter 11 bankruptcy protection when 3AC couldn’t repay around $US650 million it had borrowed from Voyager.

3AC was based in Singapore and the country’s central bank and chief regulator, the Monetary Authority of Singapore accused 3AC of misleading regulators by providing “false information.”

Voyager is looking like a black hole with potential losses of close to $US6 billion at this stage. With the reported losses in 3AC, the amount lost is around $US16 billion which is not a small amount – it’s a big failure in any sector of financial services.

3AC’s failure has also hit US-based crypto lenders Genesis and BlockF, crypto derivatives platform BitMex and crypto exchange FTX.

CNBC reported that according to Friday’s court filing, Zhu and Davies, both former traders for Credit Suisse, participated in an introductory Zoom call last week to discuss basic steps to preserve their assets.

“Neither founder turned on his video, and both remained muted for the duration, with all dialogue conducted through counsel. Their lawyers said at the time that they “intended to cooperate,” according to CNBC’s report of the court filing.

During the meeting, representatives helping to facilitate the liquidation requested immediate access to 3AC’s offices and to information related to their bank accounts and digital wallets. As of Friday, that access had not been granted, the filing says.

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

On July 1, the firm filed for Chapter 15 bankruptcy protection from US creditors in the Southern District of New York, after a plunge in cryptocurrencies and the collapse of the terraUSD (UST) stablecoin project wiped out its assets.

That filing followed one the week before in a court in the British Virgin Islands which ordered the fund to liquidate in order to pay back its debts. 

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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