Creditors want to know whether there has been any movement of funds by 3AC in digital wallets and bank accounts. The hedge fund manager has infected at least one other company in the crypto ecosystem after the stablecoin TerraUSD collapsed.
The liquidators of hedge fund manager Three Arrows Capital (3AC) filed a lawsuit against its founders with the federal bankruptcy judge.
The motion got approval at a hearing when the liquidators of advisory firm Teneo sought to contact exchanges linked to the hedge fund manager. The liquidators of 3AC want to preserve its assets, but Kyle Davies and Su Zhu have helped them, except for some information on a spreadsheet.
Nobody has known about Zhu and Davies since July 9th, and trips to the offices of the hedge fund in late June were fruitless. The employees from nearby companies said they had not seen anyone enter or leave the 3AC premises.
The post office had shoved unopened mail under the closed door of Three Arrows Capital. The attorneys of Zhu and Davies appeared on a Zoom call with advisory firm Teneo but did not answer direct questions.
The Purpose of the Motion to Sue the Founders of 3AC
The idea behind the lawsuit against the founders of 3AC is to disclose that the liquidators now manage the assets. Adam Goldberg, a lawyer for Teneo, said they are looking at fund deposits of funds belonging to the hedge fund.
They want to see whether there has been any movement of funds in its digital wallets and bank accounts. Some third parties have requested compliance with the 3AC rules for the citations.
According to Blockchain security firm Peckshield, Three Arrows Capital had moved a significant volume of cryptocurrencies to the KuCoin Exchange. It reportedly included USD 20 million worth of USD Coin (USDC) and USD 10 million worth of Tether (USDT), which KuCoin denied.
The liquidators created a website for creditors to appeal against 3AC and learn more about the liquidation ordered by the British Virgin Island Court. Two of the first creditors pushing for the liquidation of the hedge fund manager are Deribit and Blockchain.com. For example, Three Arrows Capital borrowed 1,300 BTC and 15,000 ETH from Deribit in March 2020.
The Credit of 3AC spread credit contagion
The attorneys of Teneo said they still do not know the whereabouts of the founders. Zhu and Davies have received violent threats while the Monetary Authority of Singapore investigates them for providing misleading information. Besides, they exceeded the value of assets under their two-term management in 2020 and 2021.
The troubled crypto fund management has infected at least one other company in the crypto ecosystem. That started as credit contagion spread when the stablecoin TerraUSD (UST) collapsed after losing 3AC USD 200 million. Voyager Digital, which lent the company USD 600 million, filed for bankruptcy over the last after suspending all trades and withdrawals.
By Alexander Salazar
