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What Have 3AC Founders Done with Creditors Funds? Jailed Zhu Su Not Co-operating, Kyle Davies at Large

Published October 11, 2023 11:16 AM
James Morales
Published October 11, 2023 11:16 AM
Key Takeaways
  • 3AC Co-Founder Zhu Su was arrested in Singapore last month.
  • The trail of crypto assets that belonged to the bankrupt hedge fund remains shrouded in mystery.
  • Zhu and fellow co-founder Kyle Davies have so far refused most cooperation with the liquidator Teneo.

Since its insolvency pinning down assets owned by the bankrupt crypto hedge fund Three Arrows Capital (3AC) has proven to be a challenge. But with co-founder Zhu Su now sitting in Singapore’s Changi Prison, the whereabouts of 3AC’s vanishing assets may soon come to light.

Following his arrest last month, the company responsible for managing 3AC’s liquidation, Teneo, is reportedly seeking permission to visit Zhu in jail.

Teneo Seeks to Grill 3AC Founder About Creditor Funds

According to local news outlet Zaobao , Teneo wants to question Zhu in relation to 3AC assets; however, based on his past actions, there is no guarantee he will cooperate.

The report notes that if he refuses to meet, they may take additional legal action to enforce compliance. 

From the outset, Zhu and his 3AC co-founder Kyle Davies have been notoriously antagonistic toward Teneo. And although Zhu is now within reach behind bars, Davies remains on the run.

Photos show 3AC co-founder Su Zhu’s arrest in Singapore 
byu/Yellowflash274  inCryptoCurrency 

Even before the firm was declared bankrupt in June 2022, Zhu and Davies had started ghosting creditors  as the hedge fund’s debts became unsustainable. 

Once it became clear that 3AC’s liabilities far exceeded its assets, the two men promptly abandoned ship and have been dodging  responsibility ever since. Yet, despite being barred from regulated activity in the country, Zhu opted to stay put in Singapore.

According to an anonymous source cited by Zaobao, prior to his arrest, Teneo had been monitoring the disgraced fund manager. 

As a result of its efforts, the liquidator was made aware that he might try to leave the country on September 29. After Teneo reported his movements to the police, Zhu was then arrested at Singapore Changi Airport.

Ownership of 3AC’s Crypto and Physical Assets Remains Obscure

The combative nature of the relationship between Teneo and the 3AC founders has been a feature of the hedge fund’s troubled insolvency proceedings from the start.

Back in June 2022, with its founders on the run, Teneo’s Cristopher Farmer and Russel Crumpler were appointed  to administer the bankrupt estate’s liquidation by a court in the British Virgin Islands, where 3AC was registered.

In documents  submitted to the court in July of that year, Farmer and Crumpler noted that a number of unexplained transactions draining tens of millions of dollars worth of crypto from the company’s wallets had been observed. The firm was “unable to identify to whom the Company’s funds had been transferred and for what purposes the Company’s funds had been transferred,” they wrote.

Farmer and Crumpler’s submission to the court goes on to speculate that a $30M super yacht and a Singapore bungalow purchased under the name of Zhu’s wife may also be subject to creditors’ claims.

However, “at this stage, it is unclear how the assets of the Company were dealt with by its founders and whether the assets of the Company were used toward the purchases that they have been making,” they noted, adding that Zhu and Davies have not been forthcoming with information.

Zhu’s Arrest Could Answer Important Questions

Unlike physical assets, even when liquidators are able to identify wallet addresses holding a firm’s crypto, actually gaining access to these requires the cooperation of the wallet’s key holders. And in the case of 3AC, Zhu and Davies appear to have largely stonewalled Teneo’s requests.

Ultimately, Zhu’s arrest could finally force the 3AC co-founder to answer Teneo’s question about the ownership and whereabouts of the hedge fund’s assets. Creditors will likely welcome this news, given its significance for their ongoing recovery efforts.

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