A federal judge in New York bankruptcy court has frozen the remaining assets of crypto hedge fund Three Arrows Capital after the firm’s rapid decline.
Founded nearly a decade ago, the fund managed $10 billion in assets just a few months ago. Now its two co-founders are hiding from angry creditors who are trying to recoup some of their losses. Before filing for bankruptcy, a court in the British Virgin Islands ordered the liquidation of the beleaguered fund to pay back debts.
Judge Martin Glenn of the Southern District of New York on Tuesday granted an emergency motion to freeze Three Arrows’ assets. CNBC joined the court hearing covering the next steps in the bankruptcy process.
Glenn noted in the written decision that only the appointed bankruptcy liquidators have the power to “transfer, encumber, or otherwise dispose of any assets of the Debtor that are within the territorial jurisdiction of the United States.”
As part of Glenn’s ruling, global advisory firm Teneo, which was tasked with managing the liquidation, was also granted permission to sue Three Arrows co-founders Zhu Su and Kyle Davis, as well as banks, crypto exchanges and other institutions and firms that did business with the firm.
The main concern is that Three Arrows, also known as 3AC, and its management could pull out funds ahead of formal liquidation. Coindesk reported that Zhu wants to sell his $35 million property in Singapore, and there are reports of at least one more transfer of digital assets of the irreplaceable token held by the fund.
“A key part of this motion is to let the world know that it is the liquidators who are in control of the debtor’s assets at this stage,” Adam Goldberg, a lawyer representing Teneo, said during Tuesday’s hearing.
Zhu and Davis did not respond to requests for comment. Their attorney, Christopher Anand Daniel of Singapore-based Advocatus Law, also did not respond to CNBC’s request for comment.
Goldberg, of the law firm Latham & Watkins, said liquidators are looking for documents such as bank statements and digital wallet information.
According to lawyers representing the creditors, the main reason for the aggressive action is that the physical whereabouts of Zhu and Davis are “currently unknown.” Creditors also claim that liquidators in Singapore found 3AC’s offices empty except for a few inactive computer screens.
But after a nearly month-long hiatus from Twitter, Zhu broke his Twitter silence early Tuesday, writing that the firm’s efforts to engage with lenders had been met with “bullying.”
From his verified account, Zhu shared screenshots of emails sent by his lawyer to lawyers representing the liquidators. In these messages, the lawyer writes that the families of the co-founders “are receiving threats of physical violence.” He also said that Zhu and Davies were “working under a huge time constraint”, noting that they “had to send requests from the Monetary Authority of Singapore last week”.
In an email, Daniel, their attorney, said he had attached a spreadsheet detailing the company’s assets and said they would provide additional information about the firm’s assets “on an ongoing basis.”
CNBC requested a table from Daniel, but did not receive a response. During the hearing, Goldberg said the information provided to his team was “in no way a sufficient form of cooperation.”
Nick Carter of Castle Island Ventures, which invests in blockchain-based companies, said the process could take years.
“I wouldn’t hold my breath to see how the situation plays out,” Carter said. “I would be very concerned about disposing of assets and trying to wrest them away or perhaps expropriate assets that belong to creditors and take them out of the process for personal use of the principles that are here.”
Carter said the case is particularly difficult because it involves entities in Dubai, Singapore and other offshore locations.
“The level of coordination that is needed to unify the judicial process is very important,” Carter said.
— CNBC’s Dan Mangan contributed to this report.
A New York judge has frozen the assets of Three Arrows Capital
Source link A New York judge has frozen the assets of Three Arrows Capital