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The backstory: Three Arrows Capital (3AC) was a heavyweight in the world of cryptocurrency, managing about US$10 billion in assets at its peak last year. But then, things hit a rough patch. The Singaporean crypto hedge fund made some bad bets, especially with Luna tokens, that led to a loss of US$3 billion. To navigate this financial storm, the company filed for bankruptcy in the British Virgin Islands and Manhattan, safeguarding its US assets. It was one of the first major crypto firms to go bankrupt last year. Liquidators were also looking to recover over US$1 billion of money owed to creditors directly from the company’s founders.
But here's where things took an unexpected turn. Instead of facing the consequences head-on, company co-founders Su Zhu and Kyle Davies seemed to vanish (even though they said they were cooperating with authorities on the whole thing).
More recently: After months of staying off the radar, Su Zhu and Kyle Davies reappeared in Dubai, raising eyebrows across the crypto world. They said they were launching a platform called GTX at the time and later renamed OPNX. What's OPNX all about? It deals with tokenized versions of bankruptcy claims, even those linked to the bankrupt crypto exchanges FTX and Celsius. The duo has been sharing pictures and interviews from various locations, including Thailand, Bali, Spain and Malaysia.
Meanwhile, Dubai's crypto regulatory body fined Zhu, Davies and the OPNX team in May. These penalties were because of violations related to the marketing, advertising and promotion of their crypto-related endeavor. Singapore had also given both of them four months in jail for not cooperating with the investigation and creditors’ claims
The development: Now Zhu has found himself in hot water in Singapore. The liquidators responsible for sorting out 3ACs bankruptcy said that Zhu had been arrested at Changi Airport on Friday afternoon, apparently trying to flee the city-state. But the mystery still surrounds the whereabouts of Davies.
While Zhu is in custody, Teneo (the financial advisory firm handling 3AC’s liquidation) intends to collaborate with him to recover assets belonging to 3AC or those acquired using the fund's resources. The firm has even hinted at seeking additional court orders to get this done. To top it off, the Monetary Authority of Singapore has also barred both co-founders from engaging in regulated investment activities for a nine-year period, as confirmed by Teneo.
"Throughout the process, the liquidators' priority has been recovering the assets of 3AC and maximizing returns for its creditors," said Teneo, the financial advisory firm handling 3AC's liquidation.
"Kyle Livingstone Davies and Su Zhu (together, the 'Founders') — both of whom have maintained a particularly active social media presence in the wake of the failure of their company — have failed to offer forthright cooperation," said Teneo in a February filing. "All the while, Mr. Davies has continued to post on his Twitter account, openly ignoring the Court's directives and enjoying media attention while he continues to thwart efforts by [liquidators] to gain access to documents and information," Teneo said in the filing.
"A key part of this order is to put the world on notice that it is the liquidators that are controlling the debtor's assets at this stage," said Adam Goldberg, a lawyer for the liquidators, back in July of 2022.