Crypto

Three Arrows crypto hedge fund liquidators seek $40.5 million over superyacht sale

NEW YORK — Insolvency professionals overseeing the cleanup of former crypto hedge fund Three Arrows Capital said they took control of more than US$35 million (S$47 million) in hard currency, seized more than 60 types of digital tokens and even wanted US$30 million (S$40.5 million) from the sale of a superyacht named “Much Wow” as part of their recovery efforts.

But the lack of cooperation from fund founders Zhu Su and Kyle Davies complicates the liquidation, which aims to repay as much as possible creditors who owe more than US$3 billion. Three Arrows advisers have had only two live conversations so far – via video conference – with the founders, who are believed to be either in Bali or the United Arab Emirates, according to a presentation made in bankruptcy court on Friday.

“We had to effectively recreate the business and the company records from scratch” because Zhu and Davies are not cooperating, said Mr. Russell Crumpler, liquidator of Three Arrows in the British Virgin Islands.

Three Arrows collapsed earlier this year after a series of ill-advised bets and crypto prices deteriorated left the fund, which was known to trade turbocharged through leverage, in the face of margin calls. She previously managed about $4 billion in assets. The implosion was one of many spring blasts to rock the industry, which is absorbing further shock after the sudden fall last month of Mr. Sam Bankman-Fried’s FTX empire.

The lack of commitment of MM. Zhu and Davies make even the simplest legal procedures difficult. Because their precise whereabouts are unknown, attorneys are trying to subpoena the duo via Twitter. But on Friday, the American bankruptcy judge, Martin Glenn, expressed concern about the effectiveness of such an order because the nationality of MM. Zhu and Davies is unclear.

A lawyer for Three Arrows railed against the founders at Friday’s hearing, saying the pair were failing in their duty to help creditors get paid. He also said the duo hired security experts on the eve of the hedge fund’s collapse to establish a secure means of communication that could be taken down.

“The behavior of the founders shows they have something to hide,” said Mr. Adam Goldberg, a Latham & Watkins attorney representing Three Arrows in the United States, during the hearing. Mr Zhu and Mr Davies left the liquidators “no choice” but to subpoena them for information, he said.

Mr Zhu, reached by phone, refuted the liquidators, saying he and Mr Davies “cooperated throughout”, and that they provided “Saft legal documents for private investments as well as contract details, a complete list of the fund’s assets, the contacts of all service providers who have information, permanent ad hoc support.” Saft refers to a contract which gives its owner the right to a certain number of coins to be issued in the future .

Mr Davies said on Twitter that “unfortunately our liquidators appear to be refusing to constructively engage us. After months, cash in bank account, minimal asset sales, still no payouts to creditors Let’s talk openly with all creditors to find a better way forward.

Representatives of a Singapore-based law firm of Mr. Zhu and Mr. Davies did not respond to a request for comment.

superyacht

Advisors discovered evidence that money was flowing directly from Three Arrows to pay for Much Wow, a luxury superyacht, according to the hedge fund’s liquidators. The company that built the boat eventually canceled the purchase contract because the last amounts due were not paid and the ship has since been resold.

The entity formed to own the vessel, Much Wow Ltd, is currently subject to insolvency proceedings in the Cayman Islands. Proceeds from the sale of the boat will ultimately go to Much Wow, and Three Arrows liquidators have filed a $30 million claim in the matter. BLOOMBERG

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