Su Zhu, one of the co-founders of Three Arrows Capital, found himself facing intense scrutiny during a two-day court hearing in Singapore. The hearing, orchestrated by liquidators seeking to recover billions of dollars on behalf of creditors, shed light on the collapse of the crypto fund that had significant repercussions on the market.
Three Arrows Capital, once a behemoth in the world of crypto hedge funds, experienced a dramatic downfall in 2022. This precipitated a significant $2 trillion decline in the overall cryptocurrency market cap. The collapse raised concerns, prompting a thorough investigation into the circumstances surrounding its failure.
The Legal Battle Unfolds
During the recent court proceedings, Su Zhu, who co-founded Three Arrows Capital alongside Kyle Davies, was subjected to rigorous questioning by lawyers representing Teneo, the appointed liquidator. The primary objective of these inquiries was to unearth critical information about the fund’s collapse and the current disposition of its assets.
It’s worth noting that Su Zhu’s appearance in court followed his arrest on September 29 at the Singapore airport. He was detained for a period of four months due to alleged non-cooperation with the winding-up process. However, his release is anticipated this month.
Recovery Efforts and Legal Complexities
Liquidators have made grave allegations against Zhu and Davies, accusing them of inadequate cooperation with the investigation. They are fervently pursuing the recovery of $1.3 billion from the co-founders. Teneo estimates that the total owed to creditors amounts to approximately $3.3 billion.
Notably, the ongoing legal proceedings between Zhu and Teneo are a civil matter. As of now, neither Zhu nor Davies is facing criminal charges in Singapore. Nevertheless, Zhu contends that they encountered significant resistance in their attempts to cooperate with liquidators. Correspondence submitted to a New York bankruptcy court by the liquidators suggests that they view the court orders they obtained as “baseless.”
The Three Arrows Capital Saga Unfolds
Three Arrows Capital, once headquartered in Singapore, shifted its registration to the British Virgin Islands following its collapse. In June of the previous year, a British Virgin Islands court appointed Teneo to oversee the liquidation of the fund’s assets.
In a separate development, both Zhu and Davies faced regulatory action from Singapore’s central bank in September. This led to the imposition of nine-year prohibition orders on both individuals for alleged risk management failings and providing false information. Liquidators are currently collaborating with global authorities in a bid to locate Davies, who remains elusive.