Relief for investors, 3AC founders receive subpoenas

Crypto Regulation
Relief for investors, 3AC founders receive subpoenas

Three Arrows Capital (3AC) founders now have to comply after a bankruptcy judge approved subpoenas allowing creditors to look for more assets to liquidate. 

Good news for creditors 

Creditors could win big in the case against Three Arrows Capital (3AC) following the approval of subpoenas to liquidate assets for the embattled Singapore-based crypto that acceded to bankruptcy early this year. The warrants direct the founders, Su Zhu and Kyle Davies, to relinquish all the company’s financial documents, including records, books of account, documents, and papers. 

The directors’ Zhu and Davies, are the main accused, alongside other personalities in the company, such as Davis’s wife, Kelly Kaili Chen, who has joint custody of property and items related to 3AC. Mark James Dubious, the company’s executive director, is also named accountable. The parties have a fortnight to table the demanded information and documents. 

Items under scrutiny 

The subpoena demands that Zhu, Davies, and the other party’s names give access to seed phrases, private keys, and necessary information to access digital and fiat assets. The court proceedings are both in the Bankruptcy Court in the Southern District of New York and in the British Virgin Island, which hosts the hedge fund. Revocation of Chapter 15 in the case enables the U.S. courts and British Virginia Islands to cooperate in resolving issues. The subpoenas are specific and detailed regarding the items required from the parties involved.  

Three Arrows Capital founders publicly announced that the company had lost more than $200 million due to the Terra algorithm’s hitches, bringing down the stablecoin to zero. The rumors necessitated other capital ventures, such as FTX and BitMEX, to liquidate positions of 3AC. The founders chose a risky procedure of gaining profits through using leveraged positions. 3AC traded with more funds than it had in its reserves but encouraged its traders to put in more money. 

3AC directors Zhu and Davies abandoned traders 

After filing for bankruptcy, Zhu and Davies vanished from the public glare leaving investors and interested parties wondering. Their reemergence in social media happened when FTX filed for bankruptcy. They have listed the United Arab Emirates as the current location.

In a tweet, Zhu accused FTX founder and CEO Sam Bankman-Fried of selling Bitcoin and Ethereum deposits to shorted clients.

Meanwhile, on his Twitter account, Davies claimed that FTX and its surrogate, Alameda Research, cannibalized trades made by 3AC. 

The order granting permission to the sorted documents and information of 3ACs came as a final nail in the coffin. Last week a ruling by the Singapore high court required the 3AC co-founders to submit affidavits in an attempt to obtain Solitaire. After the effort, liquidators announced the seizing of assets worth $35 million that the co-founders wanted to siphon. 

Creditors have moved quickly to take control of the available assets to avoid further delays. The subpoenas indicate that the judge needs more satisfaction with the information provided, thus requiring the directors and other named individuals to provide all the documents necessary to smoothen the liquidation process. 

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Wayne Jones

Wayne is an all-rounded cryptocurrency writer who has written for several publications in the fintech industry. Having graduated from the University of Essex Colchester, he developed a passion for blockchain technology and has been curious about how the blockchain can modify the traditional financial industry.