British Virgin Islands Court Freezes $1.14Bn Assets of Three Arrows Capital Founders

$1.14 Billion Worldwide Asset Freeze Targets Cryptocurrency Hedge Fund Collapse Aftermath

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KEY TAKEAWAYS

  • A court in the British Virgin Islands has issued a worldwide asset freeze on the founders of the defunct hedge fund Three Arrows Capital.
  • The freeze affects Su Zhu, Kyle Davies, and Kelly Chen, and prohibits them from dealing with their assets.
  • Both the British Virgin Islands and Singapore courts have imposed freezing orders on the founders’ assets.
  • Su Zhu has been arrested in Singapore and, along with Kyle Davies, is banned from regulated investment activity for nine years.
  • The liquidator Teneo is actively seeking to recover assets to pay back creditors estimated to be owed $3.3 billion.

The British Virgin Islands court has ordered a substantial worldwide asset freeze on the founders of the now-bankrupt cryptocurrency hedge fund Three Arrows Capital.

The founders, Su Zhu, Kyle Davies, and Kyle Davies wife Kelly Chen, are facing a legal clampdown on their assets.

This move serves as a strong reminder of the legal responsibilities that follow financial management and the inherent risks to affiliated parties.

The asset freeze also touches upon assets held by Kyle Davies’ wife, indicating a broad scope of the investigation.

Three Arrows Capital’s Financial Meltdown

The once-prominent Singapore-based hedge fund Three Arrows Capital filed for bankruptcy following a severe downturn in the cryptocurrency market.

The company failed to meet margin calls from its lenders, spiraling into bankruptcy amidst the 2022 crypto bear market.

Co-founder Su Zhu’s arrest in Singapore for trying to leave the country and Kyle Davies’ current status as a fugitive further complicate the firm’s dramatic fall from grace.

British Virgin Islands Court Freezes $1.14Bn Assets of Three Arrows Capital Founders
3AC co-founders Su Zhu Kyle Davies (Left) and Kyle Davies (Right)

Recovery Efforts and Family Involvement

The inclusion of Kyle Davies’ wife, Kelly Chen, in the freeze order underscores the extensive measures liquidators are taking to recuperate funds.

There is a concerted effort by the appointed liquidator, Teneo, to involve all related parties in the asset recovery to ensure creditors can reclaim what is owed to them.

Arrests and Regulatory Consequences

Both Su Zhu and Kyle Davies face a nine-year ban from conducting regulated investment activities in Singapore.

This decision by the Monetary Authority of Singapore reflects the gravity of their alleged misconduct with Three Arrows Capital.

Zhu, currently imprisoned, and Davies, whose whereabouts are unknown, are at the center of a regulatory storm that seeks to uphold financial order and integrity.

The Pathway to Asset Recovery

The asset recovery process is crucial for the creditors of Three Arrows Capital, who face significant financial losses totaling approximately $3.3 billion.

The liquidator’s efforts are hindered by the lack of cooperation from Zhu and Davies.

Nonetheless, Teneo continues to work diligently to gather information and recover assets, aiming to mitigate the impact on the creditors affected by the hedge fund’s collapse.

Allegations and Legal Maneuvers

Teneo alleges that the founders’ actions significantly contributed to the deterioration of Three Arrows Capital’s financial position.

The liquidator is pursuing a worldwide freezing order to match the level of the alleged financial damage. However, requests for comments from Teneo have yet to receive a response.

Regulatory Actions and Impact

The bans enacted by Singapore’s central bank against Zhu and Davies are part of a broader crackdown on the activities surrounding Three Arrows Capital.

These regulatory measures serve as both a punitive response to their roles in the hedge fund’s demise and a deterrent to prevent similar occurrences in the financial sector.

Creditors’ Claims and Protection

The asset freezing order plays a pivotal role in safeguarding assets that may be used to satisfy creditors’ claims.

As the liquidator continues to navigate the aftermath of the hedge fund’s collapse, the main goal remains to secure and return lost investments to those affected by the financial fallout.

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