Three Arrows Capital: $1B Asset Freeze in Crypto Fund Collapse

A British Virgin Islands court has frozen $1 billion in assets owned by Three Arrows Capital cryptocurrency hedge fund founders Su Zhu and Kyle Davies. Bloomberg reported the court order restricts Davies’ wife, Kelly Chen, from transferring or selling assets. The freeze follows a Singapore court’s domestic order, where Zhu recently appeared as a liquidator and sought information about the fund’s failure.

Moreover, during the Singapore court hearing, Zhu faced questioning regarding asset whereabouts and details about the crypto hedge fund’s collapse. The liquidators estimate that creditors are owed around $3.3 billion.

After filing for bankruptcy, Teneo, the appointed liquidator, stated a connection between the worldwide freezing order and claims against the founders. These claims allege their responsibility for the fund’s deterioration.

Teneo accused the founders of failing to “cooperate meaningfully.” The trouble for 3AC’s founders began last year with exposure to stablecoin issuer Terra, leading to the fund’s collapse. The liquidator’s claims are part of a larger pattern, with other bankruptcies contributing to the crypto winter, wiping trillions off the market.

Three Arrows Capital Collapse Spurs Asset Freezes

After the implosion of 3AC, perhaps the largest among all the crypto-native hedge funds. Investigators are now looking into Do Kwon, Alex Mashinsky, and other founders involved in several major crypto collapses.

The authorities are applying for freezing orders. They claim the fund has deteriorated due to negligence on the part of its founders. Therefore, the founders should bear responsibility for freezing.

In addition, legal issues only make things worse for the founders of companies operating in a scrutinized sector such as cryptos. Freezing assets and probing into high-level figures characterize the growing trend of clarifying AI legal standards. This trend seeks to establish greater clarity and accountability in artificial intelligence.

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