The founders of the bankrupt crypto hedge fund Three Arrows disappear

The co-founders of the failed crypto-hedge fund Three Arrows Capital appear to be on the run from creditors, according to court documents recently filed in New York.

Lawyers representing the creditors say that the physical whereabouts of Zhu Su and Kyle Davies, who started Three Arrows in 2012, are “currently unknown”, ahead of a hearing scheduled for 1 p.m. 09.00 A Tuesday to discuss the next steps in the liquidation process. The documents, submitted on Friday night, also claim that the founders have not yet begun to cooperate with the liquidation process “in any meaningful way”. On Monday, lawyers for Three Arrows Capital asked the court to keep the identities of the creditors anonymous.

Zhu and Davies did not respond to requests for comment.

Three Arrows, also known as 3AC, managed about $ 10 billion in assets as of March. On July 1, the firm applied for Chapter 15 bankruptcy protection from U.S. creditors in the southern district of New York, after a plunge in cryptocurrencies and the collapse of the terraUSD (UST) stablecoin project wiped out assets.

Prior to the bankruptcy proceedings, a court in the British Virgin Islands ordered the besieged fund to be wound up in order to repay the debt.

Now 3AC is in bankruptcy law, facing angry lenders who want their money back. The global consulting firm Teneo was hired to help deal with the liquidation, and began by trying to figure out what was left.

According to Friday’s court document, Zhu and Davies, both ex-creditors of Credit Suisse, participated in an introductory interview with Zoom last week to discuss basic steps to preserve their assets. Neither of the founders turned on their video, and both remained muted all the time, with all the dialogue conducted through the lawyer. Their lawyers said at the time that they “intend to cooperate”.

During the meeting, representatives who helped facilitate the settlement sought immediate access to 3AC’s offices and to information related to their bank accounts and digital wallets. As of Friday, that access was not given, it is stated in the archive.

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

The archive notes that while the office door was locked, representatives could see unopened mail addressed to Three Arrows, which “appeared to have been pushed under the door or backed against the door.” Neighbors in surrounding offices said they had last seen people at the 3AC office in early June.

Meanwhile, creditors are trying to figure out what assets remain.

Teneo’s Russell Crumpler, who was tasked with helping simplify the bankruptcy process, said in a sworn statement that there was a “real risk” that 3AC’s assets would disappear, “absent immediate authority to pursue discovery”.

“This risk is increased because a significant portion of the debtor’s assets consist of cash and digital assets, such as cryptocurrencies and non-fungible tokens, which are easily transferable,” Crumpler said in a statement.

There are reasons for such concern. One of 3AC’s NFTs was transferred to another crypto wallet, according to a well-known NFT collector and investor.

In Friday’s submission, creditors request that the court suspend 3AC’s right to transfer or dispose of any assets. Lawyers also request that the court summon the founders or others who may have information about 3AC’s assets. This may include banks, crypto exchanges and counterparties.

3AC’s insolvency has already had a major impact on the broader crypto market, because so many institutions had wrapped up money with the company.

Digital Asset Broker Voyager Digital applied for Chapter 11 bankruptcy protection after 3AC was unable to repay the approximately $ 670 million it had borrowed from the company. US-based crypto lenders Genesis and BlockFi, cryptocurrency derivative platform BitMEX and crypto exchange FTX are also affected by losses.

SEE: Voyager Digital suspends withdrawal as Three Arrows Capital files for bankruptcy