After the fall of the crypto hedge fund from prominence, a federal judge in a bankruptcy court in New York issued the order of freezing Three Arrows Capital’s remaining assets.
Founded almost a decade ago, 3AC had a total of $10 billion worth of assets under management just a couple of months ago. Now, the two founders of the crypto hedge fund have gone into hiding, as creditors are trying to recover their losses. Before the fund filed for bankruptcy, a court in the British Virgin Islands had ordered the embattled company to liquidate its assets in order to pay off its debts.
The emergency motion was granted by the Southern District of New York on Tuesday by Judge Martin Glenn for freezing the fund’s assets. According to the judge, only the bankruptcy liquidators assigned have the authority of transferring or disposing of the assets of the debtor that can be found within the United States’ jurisdiction.
In accordance with Glenn’s ruling, Teneo, the global advisory firm that was hired by 3AC for managing the liquidation process, will have the authority. This means that they can subpoena the co-founders of Three Arrows Capital, Kylie Davies, and Zhu Su. Plus, they can also subpoena crypto exchanges, banks, and other companies and institutions that have been involved with the crypto hedge fund.
The biggest concern that creditors have right now is that the leadership team of 3AC could be siphoning off the company’s funds before the formal liquidation process. According to CoinDesk, Zhu wants to sell of his property in Singapore worth $35 million. There have also been reports of the transfer of at least one NFT (non-fungible token) that 3AC had.
In the hearing conducted on Tuesday, a lawyer representing Teneo, Adam Goldberg said that the most important aspect of the motion was to inform everyone that the debtor’s assets are now in control of the liquidators.
Hailing from Lathan & Watkins, Goldberg said that the liquidators were currently trying to locate documents of 3AC, such as digital wallet data and account statements.
Founders go into hiding
One of the primary reasons for taking aggressive action is the fact that Davies and Zhu cannot be located. Their physical whereabouts are unknown, as per the creditors’ lawyers. In fact, their lawyers also alleged that the offices of the crypto hedge fund had been vacant when liquidators visited and they had not spoken or turned on their audio in a Zoom call.
Zhu had been on a hiatus from Twitter for almost a month but broke his silence early on Tuesday. He said that their efforts to cooperate with the creditors had resulted in ‘baiting’. Posting screengrabs of emails from his attorney to the liquidators’ counsel, he said that their families had been threatened with physical violence.
The attorney also added that the co-founders had been working under a lot of pressure and they also had to answer queries last week from the Monetary Authority of Singapore (MAS), where the fund is based.