The entire stablecoin market is now worth over $160 billion.
Justin Tallis | AFP via Getty Images
Co-founders of a failed crypto hedge fund Capital Three Arrows judging by documents recently filed with a court in New York, he is hiding from creditors.
Lawyers representing creditors say the physical whereabouts of Zhu Su and Kyle Davis, who founded Three Arrows in 2012, are “currently unknown” ahead of a hearing scheduled for 9 a.m. ET Tuesday to discuss next steps in liquidation process. The filings Friday night also allege that the founders have not yet begun to participate in the liquidation process “in any meaningful way.” On Monday, lawyers asked the court to keep the creditors’ names anonymous.
Zhu and Davis did not respond to requests for comment.
Three Arrows, also known as 3AC, was managing about $10 billion in assets back in March. On July 1, the firm filed for Chapter 15 bankruptcy protection from U.S. creditors in the Southern District of New York after the fall of cryptocurrencies and the collapse of the terraUSD (UST) stablecoin project wiped out its assets.
Before filing for bankruptcy, a court in the British Virgin Islands ordered the liquidation of the beleaguered fund to pay off its debts.
Now 3AC is in bankruptcy court facing irate creditors who want their money back. Global consulting firm Teneo was hired to help manage the liquidation, starting with trying to determine what was left.
According to court documents filed Friday, Zhu and Davis, former traders at Credit Suisse, attended the orientation meeting. Increase called last week to discuss basic steps to preserve their assets. Neither of the founders turned on their video, and both were silent all the time, and all dialogues were conducted through a lawyer. Their lawyers said at the time that they “intend to cooperate.”
During the meeting, the representatives who facilitated the liquidation requested immediate access to 3AC offices and information regarding their bank accounts and digital wallets. As of Friday, that access had not been granted, the document said.
When the fund’s liquidators had previously arrived at 3AC’s Singapore office in late June, trying to meet with the founders, “the offices seemed empty except for a few inactive computer screens.”
The documents note that when the office door was locked, representatives could view unopened mail addressed to the Three Arrows, which “appears to have been stuffed under the door or leaned against the door.” Neighbors in nearby offices said they last saw people at the 3AC office in early June.
Meanwhile, lenders are trying to determine what assets are left.
Teneo’s Russell Krampler, who was tasked with facilitating the bankruptcy process, said in a sworn statement that there was a “real risk” of 3AC’s assets disappearing “in the absence of immediate authority to investigate.”
“This risk is heightened as a significant portion of Debtor’s assets consists of cash and digital assets such as cryptocurrencies and non-fungible tokens that can be easily transferred,” Krampler said in a statement.
In a filing filed on Friday, the creditors are asking the court to suspend 3AC’s right to transfer or dispose of any assets. Lawyers are also asking the court to subpoena founders or others who may have information about 3AC’s assets. These can be banks, crypto-exchanges and counterparties.
3AC’s insolvency has already had a major impact on the wider crypto market because many institutions have poured money into the firm.
Brokerage operations with digital assets Voyager Digital filed for Chapter 11 bankruptcy protection after 3AC failed to pay the approximately $670 million it took out a loan from the company. Cryptocurrency lenders in the US Genesis and BlockFi, crypto derivatives platform BitMEX and FTX also suffer losses.