Latham and Singapore Trio Lead as Crypto Hedge Fund Succumbs to $3.5 Billion in Debt

Singapore law firms Advocatus Law, Solitaire LLP, WongPartnership, along with Latham & Watkins and offshore firm Ogier, are advising on the decline of cryptocurrency-focused hedge fund Three Arrows Capital Ltd (3AC).

Until April this year, 3AC, which was established in 2012, had approximately $3 billion in assets under management. Its downfall was partly triggered by the collapse of its algorithmic stablecoin, TerraUSD, and its sister token Luna in May.

The British Virgin Islands (BVI) court-appointed liquidator of the insolvent fund, Teneo, has hired Singapore Big Four firm, WongPartnership, to convince the Singapore courts to recognize the BVI’s liquidation order, issued in June. Partners Manoj Pillay Sandrasegara, Lionel Leo and Daniel Liu led for WongPartnership, the firm confirmed.

Ogier’s Hong Kong partner Justin Davis and BVI-based partner Grant Carroll are also acting for Teneo, according to a firm statement.

The High Court of Singapore has since granted interim relief to Teneo to investigate and preserve the assets of 3AC. As part of the order, Teneo also won permission to subpoena 3AC co-founders Kyle Davies and Zhu Su, as well as the banks and digital asset exchanges linked to the cryptocurrency fund.

The Singapore court was convinced that there is a risk of siphoning funds from the co-founder, whose whereabouts are unknown. Local news outlets have reported that ahead of the formal liquidation, Zhu has attempted to sell his $35 million Singapore property, and that there has been at least one digital asset transfer of a non-fungible token held by the fund.

3AC filed for Chapter 15 bankruptcy on July 1. According to the filing, Latham & Watkins represents Three Arrows in the US bankruptcy. The Latham & Watkins team consisted of partners Adam Goldberg and Daniel Schecter, among others.

In Singapore, the troubled firm is represented by Advocatus Law’s managing partner Christopher Daniel and Solitaire’s Nichol Yeo, according to documents seen by Law.com International.

Latham, Ogier and Advocatus did not respond to requests for comment.

3AC was among a group of investors that participated in a recent $1 billion token sale by Luna Foundation Guard, a non-profit organization launched by TerraUSD founder Do Kwon. The funds went to a TerraUSD reserve to help the stablecoin maintain its peg to the dollar.

The wipeout of the stablecoin’s value decimated 3AC’s investment, it also created a devastating ripple effect, causing the value of cryptocurrencies to plummet.

3AC’s default has also led to the bankruptcy of another high-profile digital asset brokerage Voyager Digital, which has unpaid loans to 3AC totaling $646 million. The former crypto firm has received legal assistance from New York-based Joshua Sussberg at Kirkland & Ellis.

A week ago, Zhu broke his silence and shared via his social media page on Twitter the legal letter his Advocatus lawyer sent to liquidators. In these letters, Daniel said that the families of the co-founders “have received threats of physical violence” and that the co-founders have also “worked under a lot of time pressure”, and have “had to field questions from the Monetary Authority of Singapore (MAS)”.

So far, MAS has said it will intensify scrutiny 3AC as it assesses whether there were more breaches by the fund. MAS has reprimanded 3AC for providing false information and exceeding the limit for assets under management between 2020 and 2021.