A British Virgin Islands court has frozen roughly $1 billion in assets which belong to the founders of Three Arrows Capital, the cryptocurrency hedge fund, according to the firm’s liquidator.
In an emailed statement, the liquidator Teneo said that the court had issued an order which prevented cofounders Su Zhu and Kyle Davies, as well as the wife of Davies, Kelly Chen, from selling or transferring up to $1.14 billion in assets. The liquidator added that according to estimates, creditors of Three Arrows are owed about $3.3 billion.
In 2022, following a series of bad bets, Three Arrows, which was once among the largest crypto-native hedge funds, imploded spectacularly. The failure was a part of a crypto-rout which set off a spate of collapses in the sector.
Teneo said, “The worldwide freezing order has been sought in connection with claims that are being pursued by the liquidators that allege, amongst other things, that the founders should be held responsible for causing 3AC’s position to deteriorate by an amount that is equivalent to the value of the freezing orders sought.”
A legal representative for Zhu and Davies, did not respond to requests for comment.
Having previously operated out of Singapore, Three Arrows filed for bankruptcy in the British Virgin Islands. The liquidator appointed by the court, Teneo has said previously that the founders have failed to cooperate meaningfully.
One day before the order was issued, Teneo noted the Singapore court had issued a domestic freezing order. That came after Zhu was arrested in September in Singapore at the Changi Airport, as he was attempting to leave the country. Both Zhu and Davies have been banned from conducting any regulated activity in Singapore.
Bloomberg News has reported that Zhu is poised to be released this month due to standard provisions for good behavior.
Zhu and Davies are now among the pantheon of stars of the crypto world whose names and reputations have been stained following revelations of risky behaviors which caused the collapses of their enterprises. They have joined the likes of Sam Bankman Fried, who founded the FTX crypto exchange, only to misappropriate customer funds, and then lose it all when a liquidity issue triggered the collapse of the exchange.
Bankman Fried is presently awaiting sentencing after being convicted on seven counts of fraud. He could face as much as 110 years in prison.
