The liquidators of Three Arrows Capital (3AC) are seeking $1.3 billion from Su Zhu and Kyle Davies, the two founders of the collapsed ‘crypto’ hedge fund, a new report reveals.
The liquidators from New York-based consulting firm Teneo believe that the $1.3 billion reflects the losses the two founders accrued in the months before the hedge fund collapsed. Citing a source familiar with the matter, Bloomberg reports that the liquidators met on Tuesday to discuss the next steps in the liquidation process.
The Teneo liquidators have been pursuing Davies and Zhu for months now following the collapse of the hedge fund a year ago. They have accused the two of “shamelessly” failing to cooperate, making the liquidation more strenuous.
This month, Teneo requested a New York court to hold Davies in wilful contempt and impose sanctions. It suggested a $10,000 daily fine until he complies with a March subpoena.
In the Tuesday meeting, the liquidators reportedly accused Zhu and Davies of taking on significant leverage between May and June 2022. This followed the collapse of Terra’s LUNA and UST tokens in early May, a project they had heavily invested in. When they took on the leverage, they were already aware that their firm was insolvent, Teneo claims.
To recover the $1.3 billion, Teneo is taking action against the two in a British Virgin Islands court.
The looming court filings are the latest legal action by the liquidators as they attempt to recover the $3.3 billion 3AC is believed to have owed investors. Immediately after the hedge fund was ordered to liquidate, they recovered $40 million in NFTs and cash held in bank accounts.
In December, they recovered $35.6 million more in cash held in Singaporean banks. They also filed for court clearance to sell the ‘Much Wow’ superyacht owned by the two founders.
As the liquidators struggle to get a hold of Zhu and Davies, the two have dived back into the digital asset industry with their latest offerings—a ‘crypto claims’ exchange and a revamped 3AC hedge fund. The exchange, known as the Open Exchange (OPNX), has already drawn the ire of Dubai regulators for operating without a license.
3AC Ventures, their new version of the failed fund, claims to focus on “superior risk-adjusted returns without leverage.” Its website claims to have invested in OPNX and Raise R, a decentralized credit market. The new venture has drawn criticism from the digital asset ecosystem, even from those within the Crypto Crime Cartel like Arthur Hayes.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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