- Liquidators from Three Arrows Capital are seeking to recover $1.3 billion from co-founders Kyle Davies and Su Zhu
- Teneo alleges that Davies and Zhu caused Three Arrows to take on significant leverage after suffering losses from the Luna/TERRA collapse.
- Legal action is being pursued in a British Virgin Islands court, with Teneo aiming to recoup losses for the firm’s creditors
Three Arrows Capital’s liquidators are aiming to reclaim $1.3 billion from the co-founders of the defunct crypto hedge fund, Kyle Davies and Su Zhu. Bloomberg reports that the amount represents the losses attributed to the founders during the months leading up to the fund’s collapse in July last year, with a recent creditor meeting seeing Teneo discuss the allegations made against Three Arrows co-founders Su Zhu and Kyle Davies. The pair are accused of causing Three Arrows to take on significant leverage between May and June 2022 following losses suffered in the wake of the Terra/LUNA collapse.
Three Arrows Was Insolvent Following Terra Collapse
Teneo’s legal action, taken in a court in the British Virgin Islands, is predicated on their belief that Three Arrows was already insolvent at the time that Zhu and Davies took on the leverage to try and bail the company out. As a result, the liquidator is seeking to recover these losses on behalf of the firm’s creditors. Lawyers representing Zhu and Davies are yet to respond to the accusations.
The allegations by the liquidators against the co-founders signify an escalation of their actions following previous claims that the pair are not cooperating with their investigation. The firm was appointed by a Virgin Islands court last year with the goal of recovering funds for Three Arrows’ creditors, who are owed approximately $3.3 billion.
Whereabouts Unknown
Recently, the liquidators urged a New York bankruptcy judge to impose a fine of $10,000 per day on Davies, citing his failure to respond to a subpoena requesting business records and other information. The liquidators have stated that they are unaware of the current whereabouts of Davies or Zhu, but referred to a New York Times article that reported Davies had traveled to Bali after the collapse of Three Arrows.
The pair have since co-founded a new operation, Open Exchange, which allows creditors of defunct crypto platforms to trade their claims.
No, really.
