The founders of the defunct cryptocurrency hedge fund Three Arrows Capital (3AC) have been hit with a worldwide asset freeze. The British Virgin Islands court issued an order, effective immediately, targeting co-founders Su Zhu, Kyle Davies, and Davies’ wife Kelly Chen. This action, enforced by the liquidators from Teneo, comes as a response to the firm’s bankruptcy filing last year amid a steep decline in crypto market values.
The order restricts Zhu, Davies, and Chen from any transactions involving their assets, including sales or transfers, up to a total value of $1.144 billion. This move aims to preserve the remaining assets for potential recovery and sends a stern warning to those connected to the founders about their legal responsibilities and associated risks.
Expanding Recovery Efforts and Legal Implications
The legal scope of this asset freeze has notably widened to include Kelly Chen, demonstrating the liquidators’ intensified efforts to recover assets. Zhu faced arrest in Singapore in September while attempting to board a flight, leading to a four-month imprisonment sentence. The current whereabouts of Davies and Chen remain unknown, and all three individuals hold Singaporean citizenship.
Singapore’s financial regulators have imposed a nine-year ban on Zhu and Davies, prohibiting them from engaging in any regulated investment activities within the country. This decision follows the duo’s alleged non-cooperation with the liquidation process. According to the liquidators, Zhu and Davies have been uncooperative in returning funds and have not voluntarily disclosed necessary information.
Challenges in Asset Recovery and Creditor Compensation
The British Virgin Islands court appointed the liquidator to oversee the bankruptcy proceedings, focusing on asset recovery and compensating creditors. The downfall of Three Arrows Capital highlights the volatility and risks inherent in the cryptocurrency market. The firm’s bankruptcy is traced back to its significant losses during a major sell-off in the crypto markets, showcasing the potential dangers of high-stakes investment strategies in this sector.
The ongoing legal proceedings and asset freeze represent a critical step in addressing the fallout from Three Arrows Capital’s collapse. As the situation develops, the focus remains on recovering assets and providing relief to the affected creditors. The crypto industry continues to grapple with regulatory challenges and market fluctuations, underscoring the importance of robust risk management and regulatory compliance in this evolving financial landscape.