3AC, as it is also known, went bankrupt due to the collapse of cryptocurrencies and its founders are missing.
Just over four months ago, Three Arrows Capital, one of the world’s largest crypto hedge funds, was managing around $10 billion in assets, and co-founder Zhu Su was quite fond of making public appearances and sharing his opinions.
However, with the collapse of cryptocurrencies, which have plummeted more than 54% so far this year, the fund had to file on July 1 for Chapter 15 of the US Bankruptcy Law in the Southern District of New York.
Events Unfolded
3AC, as the company is also known, borrowed money from various investors and financial players from other industries, and then invested the capital in other crypto projects. The company had gained a certain prestige for being in business for around 10 years.
The fall of Three Arrows Capital began at the same time and for the same reasons as with most cryptocurrencies. In May, the terraUSD stablecoin, which was pegged to the US dollar, lost almost all of its value. It was launched at the cost of US$1 and it was expected that, having a strong backing asset, it would be immune to the high volatility characteristic of cryptocurrencies.
Before filing for bankruptcy, the company moved its registered office from Singapore to the Virgin Islands, to avoid problems with regulatory authorities. From there, it began a liquidation process to pay off its debts, which included defaulting on a $670 million loan.
Now…What?
Now, the co-founders of the failed cryptocurrency hedge fund, Zhu Su and Kyle Davies, have been missing for several days, according to New York court documents.
Adam Goldberg, the lawyer in charge of the liquidation of the crypto hedge fund, assures that he does not know where the founders are and they have not shown interest in collaborating in a significant way. Following this, Chief Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York has given the liquidators permission to subpoena Zhu and Davies.
In response to the accusations, Zhu Su posted recently on Twitter that, “Sadly, our good faith to cooperate with the Liquidators was met with baiting. Hope that they did exercise good faith with the StarkWare token warrants.”
In addition to his brief appearance on social media, the Three Arrows Capital co-founder posted two letters from his attorney. In one, they claimed that they and their families had received “threats of physical violence.” On the other, he made clear his concern about the mismanagement that the liquidators were carrying out with the assets of his hedge fund.
Lawyers for the plaintiff investors and other lenders say their whereabouts are unknown and that the founders have not yet begun to cooperate with the liquidation process in any meaningful way.
At the moment, suspicions point to the fact that they would have moved to Dubai. So believes FatManTerra, the pseudonym of a cryptocurrency detective who became famous after the collapse of Terra, who points out that “it is very likely that they are there (in Dubai), although nobody is 100% sure, not even close associates”. As is known, the United Arab Emirates does not have an extradition treaty with the US, which is why they could have chosen this country as their destination.
By Audy Castaneda
