Three Arrows Capital liquidators won permission to subpoena founders Kyle Davies and Zhu Su -- whose whereabouts remain unknown -- along with banks and digital asset exchanges tied to the cryptocurrency hedge fund.
A federal bankruptcy judge granted the emergency motion in a hearing Tuesday. Liquidators at advisory firm Teneo are seeking to investigate and preserve the assets of the bankrupt hedge fund, and plan to contact as many as 24 entities connected to Three Arrows for more information.
Three Arrows, which Zhu and Davies founded after trading at Credit Suisse Group AG, succumbed to the widespread crypto selloff last month. Insolvency proceedings kicked off in the British Virgin Islands and were followed by a Chapter 15 bankruptcy filing in the US.
“We don’t know where they’re located today,” Adam Goldberg of law firm Latham & Watkins said of Zhu and Davies. The pair have provided information about some of the fund’s assets, but “this is by no means a sufficient form of cooperation,” according to Goldberg, who is representing Teneo.
The duo will continue to provide information about the firm’s assets on a “rolling basis,” Zhu posted from his verified Twitter account Tuesday. The founders are under intense pressure --including threats of physical violence and inquiries from Singapore regulators -- and are displeased with the behavior of the liquidators, according to the post.
Advocatus Law, the Singapore-based law firm representing the founders, didn’t immediately respond to a request for comment outside of normal business hours on Tuesday.
“A key part of this motion is to put the world on notice that it is the liquidators that are controlling the debtor’s assets at this stage,” Goldberg said in the hearing.
The liquidators are seeking information about banks accounts and digital wallets tied to Three Arrows, along with details of any transfers or fluctuations in the accounts in recent months, Goldberg said. They’d prefer counterparties provide the information voluntarily, but some institutions requested subpoenas to comply with company policies, he said.
Three Arrows’ downfall has rippled through the digital asset industry, helping drive at least one crypto platform that counted it as a counterparty into bankruptcy already.
The case is Three Arrows Capital Ltd and Russell Crumpler, 22-10920, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
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