Court Freezes $1 Billion in Assets of Three Arrows Capital Founders

Liquidators have obtained court orders freezing up to $1.14 billion in assets connected to the founders of failed cryptocurrency hedge fund Three Arrows Capital (3AC), according to Bloomberg. 

The restraint from the British Virgin Islands court aims to recover creditor losses from Three Arrows’ summer implosion during broader crypto market turmoil. The order also prevents Kyle Davies’s wife, Kelly Chen, from moving or selling assets.

Liquidation firm Teneo said the asset freeze relates to claims against Three Arrows founders Su Zhu and Kyle Davies over their role in accelerating the firm’s deterioration.

“The worldwide freezing order has been sought in connection with claims that are being pursued by the liquidators that allege, among other things, that the founders should be held responsible for causing 3AC’s position to deteriorate by an amount that is equivalent to the value of the freezing orders sought,” Teneo said. 

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Three Arrows Capital Owes Creditors Roughly $3.3 Billion

Teneo alleges that actions by the founders left Three Arrows overly exposed to crypto market volatility, which eventually wiped out its capital buffer against $3.3 billion in liabilities.

The asset restraint marks the latest indictment against former crypto industry moguls bankrupted by 2022’s crash. Despite reports suggesting Su Zhu’s potential release this month for good behavior, the legal scrutiny surrounding Three Arrows Capital’s collapse appears far from subsiding.

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Over the years, 3AC and Zhu have established a reputation as one of the industry’s most successful hedge funds. However, that underwent a significant shift following the collapse of Terra in 2022, setting off a series of repercussions.