Teneo, the liquidators behind bankrupt hedge fund Three Arrows Capital (3AC), are reportedly seeking to recover roughly $1.3 billion in funds from founders Su Zhu and Kyle Davies. A recent Bloomberg report claims that Davies and Zhu incurred the $1.3 billion in debt when 3AC was already insolvent, adding to creditors’ losses. 3AC reportedly owed creditors $3.5 billion, making the founders’ potential liability more than a third of the total debt.
This report arrived exactly one year since a court in the British Virgin Islands ordered 3AC into liquidation. In July 2022, the firm also made a Chapter 15 filing in U.S. Bankruptcy Court in the Southern District of New York. Throughout the liquidation process, Davies and Zhu have remained active on social media, but their physical whereabouts have been largely unknown.
In June, the pair helped launch the Open Exchange, a platform for trading claims against bankrupt crypto entities. Lawyers for the liquidators in the U.S. have also attempted to make Davies and Zhu answer in court during the bankruptcy proceedings. Both 3AC founders have been issued digital subpoenas, and the legal team sought to hold Davies in contempt of court for having “repeatedly defied their obligations.”
Among the 3AC founders’ former assets is a digital art collection being auctioned off through Sotheby’s. Pieces that were a part of the collection, such as Dmitri Cherniak’s artwork ‘The Goose,’ sold for $6.2 million in June.
On one hand, the liquidators’ pursuit of $1.3 billion from the founders for those who suffered losses as creditors provides a potential resolution for impacted parties. However, this pursuit may further unveil the dark side of the crypto market and discourage potential investors from exploring the crypto landscape. Additionally, if the founders’ whereabouts remain unknown, it leaves open questions about the possibility of recovering these funds.
As the liquidators work toward resolving this matter, their efforts may serve as an example of the challenges present in the rapidly expanding world of cryptocurrencies and highlight the importance of addressing outstanding liabilities within the marketplace. Regardless of the outcome, the situation sheds light on the need for increased oversight and regulation of the crypto industry to ensure the financial safety of both investors and other stakeholders.
Source: Cointelegraph
