Not mere weeks following its official bankruptcy filing, fledgling cryptocurrency hedge fund Three Arrows Capital (3AC) heads into a rather difficult liquidation process as creditors seemingly cannot find the firm's two founders, Zhu Su and Kyle Davies. Added to the current list of dockets amid 3AC's Chapter 15 bankruptcy filing is a new entry posted on Friday, July 8, wherein a special Emergency Motion was set, scheduling a videoconference hearing for Tuesday, July 12 at 9 AM.
Unfortunately, the docket also highlights via lawyers representing the liquidators that the location of both Kyle Davies and Zhu Su remains "currently unknown" as the hearing time wanes. The additional material within 3AC's bankruptcy filing also suggests that the two founders have yet to cooperate with liquidators "in any meaningful manner." Court proceedings also show that the lawyers have requested to keep the creditors anonymous during the liquidation process in a motion filed on Monday, July 11.
The Singapore-based crypto hedge fund was managing nearly $10 billion in assets before the cryptocurrency markets were hit with an unprecedented winter. From the depeg of terraUSD to the volatile collapse of Bitcoin's previous highs, many in the industry have faced immense hardship and uncertainty as the state of crypto swirls in anguish. For 3AC, all roads led to an untimely demise as a British Virgin Islands court required the firm to liquidate in the face of its myriad debts.
On July 1, 3AC's bankruptcy was put into writing within the Southern District of New York. An introductory Zoom call was held last week to go over preliminary liquidation proceedings, yet 3AC founders Zhu and Davies were present only as muted black screens and allowed the introductory call to be held amongst the lawyers. According to the two executives' lawyers, both Zhu and Davies "intended to cooperate" in all basic steps to preserve their assets and undergo a smooth liquidation process.
Upon request of bank accounts and digital assets information, neither party relinquished any necessary documentation or access to facilitate its liquidation. Additionally, representatives were also stunted when attempting to enter 3AC's Singapore office, citing that "the offices appeared vacant except for a number of inactive computer screens." In the interim, creditors are attempting to collate as many assets that remain within 3AC's coffers as is possible, yet according to Russel Crumpler of Teneo, a "real risk" exists in the potentiality of 3AC assets disappearing.
Creditors have already asked to suspend 3AC transfer capabilities, as well as asset disposal protocols. The filing was dated on Friday, a little less than a month after a highly valued NFT under a 3AC wallet was moved to another crypto wallet, per MoonOverlord on Twitter. Due to the fact that much of 3AC's current holdings are composed primarily of, as Crumpler puts it, "readily transferable" digital assets, the risk associated with 3AC's assets vanishing is substantially raised.
Thus, the liquidation process has yet to actually begin, given said cooperation via both Zhu and Davies has been nonexistent, adding that their physical whereabouts remain uncertain. The pair were prior Credit Suisse traders before starting 3AC in 2012, giving them ample confidence amongst crypto investors. As one finance and business economics professor at the University of Southern California, Nik Bhatia, puts it: "3AC was supposed to be the adult in the room."
