3AC Liquidators Ask Judge to Intervene, Say Co-Founder Is ‘Withholding Information’

The liquidators overseeing crypto hedge fund Three Arrows Capital’s bankruptcy proceedings have asked the judge to compel co-founder Kyle Davies to cooperate, according to a new court filing.

They wrote that Davies “continues to withhold information in his possession that is essential to accessing and controlling certain of the Debtor’s digital assets.” The liquidators allege that Davis and Zhu, “have failed to offer forthright cooperation to the Foreign Representatives, and in doing so have failed to fulfill their fiduciary duties owed to the Three Arrows estate.”

If the judge approves the motion, which was filed on Wednesday, Davies will be ordered to comply with the subpoena by March 16.

In October, the liquidators asked the judge for permission to issue subpoenas to the co-founders. That request was approved in December. Then, on January 5, the subpoenas were served over Twitter. The co-founders had until January 26, but have missed that deadline.

The liquidators wrote that they take issue with how active Davies and Zhu have been on social media and in media interviews.

“Since January 5, 2023, Mr. Davies has been active on social media, having ‘tweeted’ or ‘retweeted’ dozens of times on Twitter,” the liquidators wrote in the filing. “Shamelessly, while ducking his obligations to his failed company, Mr. Davies has been recently active in an effort to raise tens of millions to start a new crypto exchange called ‘GTX.’”

A pitch deck for GTX leaked in January showed that Davis and Zhu had teamed up with Mark Lamb and Sudhu Armugan of CoinFLEX, which underwent its own restructuring last year, to raise $25 million to launch a new crypto exchange.

The fall of 3AC

The Singapore-based crypto hedge fund, which also goes by 3AC, was ordered to liquidate in June, following weeks of speculation that the company had endured massive losses following the collapse of the TerraUSD algorithmic stablecoin in May.

Davies later confirmed that 3AC had lost approximately $200 million on its TerraUSD position in an interview with The Wall Street Journal. Pressure mounted as 3AC’s creditors’ margin called 3AC, meaning they asked them to provide more collateral to secure borrowed funds. The final blow came when Voyager Digital (which itself is now undergoing bankruptcy proceedings) issued a default notice for more than $600 million.

For a while, Davies and Zhu went quiet on social media.

In July, reports surfaced that the company’s Singapore office had been abandoned and the founders were missing. Around the same time, Zhu sent what would become his last tweet until November. He criticized Teneo, the firm overseeing 3AC’s liquidation process, for missing a deadline to claim StarkWare tokens, causing the firm to “lose substantial value.”

But both Davies and Zhu reappeared on social media as Sam Bankman-Fried’s empire, headed up by crypto exchange FTX and trading desk Alameda Research, began to collapse.

Davies wrote on Twitter that FTX and its sister company, trading desk Alameda Research, “hunted” 3AC’s trades. He also asked where “all the FTX fanboys” have gone, saying that they “worshipped SBF’s every sneeze and were highly critical of 3AC’s.”