In a landmark decision, a British Virgin Islands court has issued a worldwide asset freeze on the founders of the now-defunct cryptocurrency hedge fund 3 Arrows Capital (3AC), totaling $1.14 billion.
The court’s order, which encompasses founders Su Zhu, Kyle Davies, and Davies’ wife, Kelly Chen, signifies a pivotal moment in the ongoing saga of 3AC’s dramatic collapse.
3 Arrows Capital, once a titan in the cryptocurrency world, filed for bankruptcy in the British Virgin Islands last year after a tumultuous market downturn ravaged its portfolio.
Known for its aggressive investment strategies, 3AC had significant holdings in projects like Terra’s LUNA and Solana, managing upwards of $18 billion in digital assets at its zenith.
The firm’s downfall, triggered by the collapse of Terra and exacerbated by the broader market sell-off, sent shockwaves through the crypto industry, affecting several other companies like Celsius and Voyager.
3 Arrow’s Capital Case Stifled By Legal Entanglements and Non-Cooperation
The legal troubles for Zhu and Davies began intensifying when Teneo Restructuring, the liquidators appointed for 3AC’s bankruptcy, claimed over $1.3 billion in damages due to the duo’s uncooperative stance in the bankruptcy process.
This non-compliance led to Zhu’s four-month imprisonment in Singapore for contempt of court, with his release anticipated shortly due to good behavior.
Meanwhile, Davies faces a similar fate, though his current whereabouts remain unknown.
Adding to their woes, the Monetary Authority of Singapore has barred both from engaging in regulated investment activities for nine years.
The Extensive Global Reach of the 3 Arrow’s Capital Asset Freeze
This recent court order, echoing across borders, aims to stymie any further dissipation of assets by the founders and Ms. Chen.
The freeze encompasses the trio’s global assets, signaling to their affiliates and counterparties the legal risks and obligations they now face.
This action also marks an expansion in Teneo’s strategy, as it strives to maximize returns for creditors, whose claims exceed $3 billion.
We survived the bear market
– LUNA crash
– FTX collapse
– SEC coming after crypto
– Genesis bankruptcy
– 3AC liquidation
– Celsius collapse
– BlockFi collapse
Now to make the most of the bull
— Caff (@ChadCaff) December 16, 2023
The inclusion of Davies’ wife in the asset freeze underscores the liquidator’s comprehensive approach to asset recovery.
Despite their legal entanglements, Zhu and Davies have continued their foray into the crypto world.
They joined forces with CoinFLEX CEO Mark Lamb earlier this year to launch OPNX, an exchange for trading crypto bankruptcy claims.
This move, perceived by some as brazen, has occurred parallel to their ongoing battles with Teneo and the legal systems of Singapore and the British Virgin Islands.
The Bottom Line: A Ripple Effect Across the Crypto Industry
The collapse of 3 Arrows Capital and the subsequent legal actions against its founders have had far-reaching implications.
The firm’s failure contributed to a domino effect, impacting other crypto lenders and investors and forcing a re-evaluation of the risks associated with highly leveraged positions in the volatile crypto market.
The asset freeze serves not only as a cautionary tale but also as a reminder of the regulatory and legal frameworks that govern the crypto industry.
As the saga of Three Arrows Capital continues to unfold, the crypto world watches closely, the asset freeze is a critical development, highlighting the potential consequences of non-compliance and mismanagement in the crypto industry.
The outcome of this case will likely set precedents and shape the future of regulatory and legal oversight in the crypto sector.