Court Freezes $1 Billion In Assets Of Three Arrows Capital Founders, Signaling Mounting Legal Battle

In a recent development surrounding the downfall of cryptocurrency hedge fund Three Arrows Capital (3AC), a court has issued a significant worldwide asset freeze worth $1.14 billion on the fund’s co-founders. 

The order, issued by a court in the British Virgin Islands, comes as part of the liquidators’ efforts to recover the fund’s assets and provide returns to its creditors. According to a Barron’s report, the freeze affects co-founders Su Zhu and Kyle Davies, as well as Davies’ wife Kelly Chen.

3AC Co-Founders Face Global Asset Freeze 

Three Arrows Capital filed for bankruptcy last year following a massive sell-off in assets it had invested in, leading to substantial losses as cryptocurrency prices plummeted. 

The fund’s misfortunes triggered a series of legal proceedings, with liquidators appointed to oversee the bankruptcy proceedings.

Liquidators Teneo announced that a court in the British Virgin Islands had issued a freeze order on the assets of Three Arrows Capital’s co-founders. The order prohibits Su Zhu, Kyle Davies, and Kelly Chen from dealing with their assets, including transferring or selling them, up to a total value of $1.144 billion. 

This move aims to safeguard the assets and send a clear message to counterparties and affiliates about their legal obligations and associated risks.

Per the report, the inclusion of Kyle Davies’ wife, Kelly Chen, in the asset freeze order signifies an expansion of the liquidators’ efforts to recoup the fund’s assets.

By extending the freeze to cover assets held by Davies’ spouse, the liquidators hope to enhance the chances of recovering funds owed to creditors.

$3.4 Billion In Claims Filed Against Three Arrows Capital Estate

The liquidators have faced challenges in their attempts to retrieve the assets of Three Arrows Capital. They have accused Su Zhu and Kyle Davies of non-cooperation and failing to provide essential information voluntarily. 

Su Zhu, who was arrested in late September while attempting to leave Singapore, completed his sentence on Wednesday.

Meanwhile, Teneo’s joint liquidators, Crumpler and Farmer, estimated that creditors are expected to receive 45.74% of their claims from the bankrupt estate. Initial distributions are planned for the first quarter of the following year, signaling progress in the liquidation process.

According to The Block, as of December 18, the estimated value of Three Arrows Capital’s assets stands at $1.16 billion. Claims worth $2.7 billion are anticipated to be recognized for distribution. 

Teneo highlighted the resolution of litigation against several parties, including Digital Currency Group (DCG), Genesis, and BlockFi, which has contributed an estimated $292 million to the reported assets. However, the BlockFi settlement is still subject to approval.

A total of 154 claims, with a combined value of $3.4 billion, have been filed against the Three Arrows Capital estate. 

Notably, $200 million of claims were not admitted for distribution, while $322 million of claims have been rejected or are expected to face rejection. Additionally, claims worth $76 million remain in dispute, adding complexity to the liquidation process.

Featured image from Shutterstock, chart from TradingView.com