3AC Liquidators Want Co-Founder Kyle Davies Held In Contempt

Three Arrows Capital (3AC) liquidators have filed a court motion requesting that co-founder Kyle Davies be held in contempt of court. Through filing documents, the representatives stated that Davies ignored a subpoena related to the bankruptcy proceedings.

3AC liquidators filed the motion on June 14, with the creditor’s legal tea stating that Davies is intentionally delaying the process of asset recovery from the former crypto hedge fund. The hearing of the filed motion will take place in a few weeks.

Davies Expected To Be Sanctioned For Contempt Of Court

Davies is expected to be sanctioned for his contempt of court. Some civil sanctions against him include an award of attorney’s fees and a daily fine of $10,000 until he complies.

However, Zhu Su is not facing the same motion even as a co-founder of the insolvent hedge fund. This is because Su has Singaporean citizenship and is not subject to the US jurisdictional courts.

Recall that 3AC founders Kyle Davies and Zhu Su were subpoenaed on Twitter in January 2023. This move was related to the duo’s lack of engagement in asset recovery following 3AC’s filing for Chapter 15 in July 2022.

Also, 3AC creditors have accused the founders of avoiding an appearance in bankruptcy court. Notably, the founders’ availability and legal jurisdictions have been key factors affecting the recovery process. 

The 3AC liquidators have received the necessary approvals from US and Singaporean authorities to subpoena the founders through digital channels.

According to the latest filed motion from the liquidators, Davies and Su concealed their whereabouts and ignored their responsibilities in the process. The liquidators also alleged that the founders have been busy developing a new venture for trading claims in crypto bankruptcy cases. 

They believed that the founders spent their time for personal gains instead of restoring the lost assets for customers of the bankrupt hedge fund.

The filed motion further demands the US to seek personal jurisdiction on Davies, who is supposed to be in Bali. With such a move, Davies would be held in contempt of court and could face sanctions.

The Implosion Of Three Arrows Capital (3AC)

Kyle Davies and Zhu Su founded the hedge fund Three Arrows Capital in 2012. The duo schooled at Columbia University and worked at Credit Suisse, a giant banking firm.

The Singapore-based 3AC saw meteoric growth in the industry over the years with stakes in several crypto assets like Avalanche, LUNA, Aave, BlockFi, and others. With its increasing popularity, the hedge fund started indulging in riskier bets while promising users high interest.

In May 2022, the algorithmic stablecoin Terra and its ecosystem collapsed. This triggered a devastating crash in the crypto industry with a loss of over $40 billion worth of crypto assets. 3AC was caught in the web of this big misfortune and later became insolvent.

The hedge fund filed for the US Chapter 15 Bankruptcy Code in July 2022 to protect itself against investors’ lawsuits. The bankruptcy of 3AC started a crypto contagion that saw many firms like Celsius Network, Vogager Digital, Genesis, and others fall.