Three Arrows Capital (3AC) co-founder Kyle Davies is due to be held in contempt of court for ignoring a summons related to bankruptcy proceedings, June 14 court papers from 3AC's creditors' council show. According to the lawyer for 3AC creditors, Davies is deliberately delaying the recovery of assets from the former cryptocurrency hedge fund.
Civil penalties against Davies for his contempt include an award of attorneys' fees and a $10,000 daily fine until compliance. The motion does not apply to Su Zhu, co-founder of the bankrupt hedge fund. Due to his Singaporean citizenship, Zhu is not subject to the jurisdiction of United States courts, Cointelegraph learned from Teneo, the firm acting as liquidator in the case.
On January 5, Davies and Zhu were quoted on Twitter for not participating in asset recovery after 3AC filed for Chapter 15 in July 2022. Since then, creditors have accused the founders of being โfugitivesโ from bankruptcy court.
The whereabouts and legal jurisdictions of the founders play an important role in recovery challenges. For example, the liquidators had to obtain permission from the authorities in Singapore and the US to subpoena Davies and Zhu through digital channels.
"Three Arrows founders, Kyle Livingstone Davies and Su Zhu [...] they have repeatedly defied their obligations before the Court and have not cooperated with the efforts of the Foreign Representatives to gather the assets of the Debtorโ, the document reads. A hearing on the motion should take place in the coming weeks.
According to the liquidators, instead of complying with the subpoenas and requests for information, the "founders ignored their obligations, concealed their whereabouts, and instead spent their time creating, among other things, a new company to settle claims in cases of cryptocurrency bankruptcy".
The motion also asks the United States to seek personal jurisdiction over Davies, who is believed to be in Bali. "[...] On this record, it could not be clearer that the Court can, and must, exercise personal jurisdiction over Davies, hold him in willful contempt of court, and impose sanctions."
An auction for parts of the 3AC non-fungible token collection held last month raised $2.5 million. The company reportedly owes creditors a total of $3.5 billion. During its heyday, 3AC's estimated assets under management reached $10 billion.
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