3AC bankruptcy process faces challenges amid unknown whereabouts of founders

The liquidators claim Su Zhu and Kyle Davies are located in Indonesia and the United Arab Emirates, where foreign court orders are difficult to enforce.

Liquidators for Three Arrows Capital (3AC) will have to present further documents in order to be granted permission to subpoena the now-bankrupt crypto hedge fund’s founders through Twitter, according to a decision from Judge Martin Glenn during a virtual hearing for the Southern District of New York Bankruptcy Court on Dec. 2.

Lawyers representing the liquidators claimed that Zhu Su and Kyle Davies, co-founders of the hedge fund, have repeatedly failed to engage with liquidators over the recent months. “A communication protocol was agreed between the liquidators and founders but has not yielded satisfactory cooperation,” according to a hearing presentation.

The liquidators claimed that the founders of the company are located in Indonesia and the United Arab Emirates, where it is difficult to enforce foreign court orders.

The founders also refused to accept service through their Singapore counsel, which led the liquidators to seek alternative means to subpoena Su and Davies, as Cointelegraph reported on Oct. 18. The same day, Bloomberg disclosed that United States regulators were launching a probe into possible legal violations by 3AC regardin whether the hedge fund misled investors and failed to register with the appropriate agencies.

Judge Glenn raised questions about the citizenship and current location of the founders, mentioning issues under Rule 45, which permits parties to serve a non-party with a subpoena for the production of documents. He stated:

“From the court’s standpoint, it is relevant to the issue of servicing subpoenas on them. [...] But under Rule 45, there is an issue whether this court could exercise personal jurisdiction over either of them. And citizenship does bear on that."

The judge also noted that authorizing the issuance of a subpoena by an alternative service, such as Twitter, would only be possible if it is an “enforceable order.”

Related: Legal team for 3AC liquidators blast founders for shifting blame to FTX, media blitz amid bankruptcy

Teneo, the liquidation firm in charge of the bankruptcy process, told Cointelegraph on Oct. 5 that it had custody of the nonfungible tokens moved from addresses related to Starry Night Capital, a fund launched by the co-founders of the hedge fund.

The liquidators claim to have taken control of $35.6 million in fiat currencies held by Singaporean banks or by the company’s pre-appointment lawyers. In addition, over 60 types of tokens have been identified and are being held in a digital currency custody account under liquidators’ control, and converted to U.S. dollars as needed.