Judge freezes assets for crypto hedge fund Three Arrows Capital

The Singapore-based company, also known as 3AC, was founded a decade ago by Su Zhu and Kyle Davies, who both studied at Columbia University in New York City and worked for the same investment bank before taking names as crypto-influencers and leaders of a multi-billion dollar fund. However, it did not survive the broader meltdown of the crypto market that has wiped out hundreds of billions in value this year. Bitcoin, the most valuable digital currency, is trading below $ 20,000, having lost more than 70 percent of its value since last fall.

On June 27, cryptocurrency broker Voyager Digital said that Three Arrows Capital had not paid on a loan worth more than $ 665 million. On the same day, a court in the British Virgin Islands ordered the fund to be wound up. Four days later, 3AC filed for bankruptcy under Chapter 15 of the U.S. Bankruptcy Code, which allows a foreign debtor to manage its U.S. assets.

The court-appointed liquidators – Russell Crumpler and Christopher Farmer of the global consulting firm Teneo – cited a “lack of cooperation to date” of Zhu and Davies in an July 8 file, whose whereabouts they say is unknown. Although the fund’s lawyer, Christopher Anand Daniel from Singapore-based Advocatus Law, has been in contact, liquidators say, the co-founder has not started cooperating “in any meaningful way”.

Just before the judge granted the emergency, Zhu tweeted two screenshots of e-mail communications between Daniel and the liquidators, including one in which the 3AC lawyer called the July 8 filing a “lure.”

“It has come to the attention of our customers that you have submitted an application in the United States of America,” Daniel wrote to Crumpler. you had already prepared to submit that application, and in fact lured our customers.

“Our clients and their families have received threats of physical violence, and have had to ask questions from the Monetary Authority of Singapore in the last week or so, which has led to them working under a lot of time pressure,” Daniel added.

But in Tuesday’s hearing, Teneo’s lawyer Adam Goldberg said the information provided was “by no means a sufficient form of cooperation,” CNBC reported.

The broader digital currency market has been affected for several months. In May, Terra’s popular stablecoin terraUSD and sister token luna collapsed, causing investors to lose nearly $ 60 billion. It helped bring down Three Arrows Capital, where Zhu and Davies had vigorously promoted luna, prompting the cryptocurrency lender to suspend withdrawals. Terra’s founder, Do Kwon, was among the defendants named in a class action lawsuit filed in the U.S. District Court of North Carolina.

Last week, crypto lender Vauld announced that it had suspended all withdrawals, trades and deposits for its 800,000 members after the sharp fall in cryptocurrencies. The next day, London-based rival Nexo agreed to buy as much as 100 percent of the company. The cryptocurrency bank Celsius was also forced to freeze withdrawals in June.

Experts say that the extreme volatility is guaranteed to reinforce demands for more supervision.

“Regulation is coming, and it is coming soon,” said Kene Ezeji-Okoye, president of the UK-based digital currency company Millicent. the only way for the industry to truly achieve mainstream adoption. However, regulators must be careful to stifle real innovation. “

Ben Caselin, head of strategy and research at the AAX digital currency exchange, said that a way is being opened to make the cryptocurrency market more sustainable.

“If anything, these liquidation events should pave the way for a more sustainable market structure that is more closely linked to the core principles that inspired the creation of bitcoin, but which for too long, during this bull market, have been marketed if not evangelized, but not actually delivered by too many projects. ”