$1 Billion in Assets Seized — What Went Wrong With Three Arrows Capital?

In a shocking development, a court in the British Virgin Islands has ordered the freezing of assets totaling approximately $1 billion, owned by the founders of cryptocurrency hedge fund Three Arrows Capital (3AC). The fund, once a prominent player in the cryptocurrency hedge fund landscape, faced a tumultuous downfall in 2022, marked by ill-fated investments and a broader market downturn.

Court Intervention:

The British Virgin Islands court has issued a comprehensive order to freeze assets owned by 3AC founders Su Zhu and Kyle Davies. The liquidator, Teneo, appointed by the court, has confirmed this significant legal development, revealing that the assets restrained amount to around $1 billion. In addition, the court order prohibits Su Zhu, Kyle Davies, and Davies’ wife Kelly Chen from transferring or selling assets valued at up to $1.14 billion.

Crisis in Three Arrows Capital:

The downfall of Three Arrows Capital unfolded amidst a series of unfortunate investments, leading to the fund seeking refuge in bankruptcy proceedings in the British Virgin Islands. Teneo, acting as the liquidator, estimates that creditors are owed approximately $3.3 billion, highlighting the severe financial challenges faced by the once-thriving hedge fund.

Allegations Against Founders:

The worldwide freezing order has been sought based on claims made by the liquidators, alleging that the founders should be held responsible for causing 3AC’s financial position to deteriorate. Teneo stated,

“The freezing orders are pursued in connection with claims that allege, amongst other things, that the founders are accountable for causing 3AC’s position to deteriorate by an amount equivalent to the value of the freezing orders sought.”

Singapore’s Involvement:

The legal troubles for 3AC founders extend beyond the British Virgin Islands. The Singapore Court has also issued a domestic freezing order, coinciding with the arrest of Su Zhu in September at Changi Airport. The Singaporean authorities have banned Su Zhu and Kyle Davies from engaging in any regulated activity within the country, further complicating their legal predicament.

Repercussions for Su Zhu and Kyle Davies:

Once celebrated figures during the bullish phase of the cryptocurrency market, Su Zhu and Kyle Davies now face tarnished reputations and diminished fortunes. The Singapore court recently conducted a questioning session for Su Zhu, with talks about his potential release on the radar. The founders, who were once at the forefront of the cryptocurrency industry, find themselves entangled in legal woes and a financial crisis.

As the legal saga unfolds, the freezing of $1 billion in assets owned by 3AC founders marks a significant chapter in the downfall of Three Arrows Capital. The cryptocurrency hedge fund, which was once a powerhouse in the industry, is now grappling with legal challenges and financial woes. The future remains uncertain for Su Zhu, Kyle Davies, and the once-thriving Three Arrows Capital as they navigate the aftermath of their tumultuous journey in the cryptocurrency market.