Shalini Nagarajan

Dubai&#8217;s crypto regulator imposed a $2.7 million penalty on OPNX, a venture by Three Arrows Capital founders Kyle Davies and Su Zhu, for alleged violations in promoting virtual assets.



The Virtual Asset Regulatory Authority (VARA) imposed the fine on May 2 and remains unpaid to date.&nbsp;



Additionally, Davies, Zhu, co-founder Mark Lamb and OPNX CEO Leslie Lamb were fined 200,000 Emirati dirhams ($54,451) for not adhering to marketing, advertising and promotion regulations. This latter fine has been settled, according to a <a href="https://stage-dwtc.euwest01.umbraco.io/media/5obg53zt/vara-notice-of-fines-opnx-exchange.pdf">notice</a> published Wednesday.&nbsp;



Because the $2.7 million fine hasn&#8217;t been settled, VARA mentioned it intends to take subsequent measures against OPNX. This could involve additional fines, penalties and measures to ensure payment is received.



Blockworks has reached out to OPNX CEO Leslie Lamb for comment.



Earlier in May, VARA <a href="https://blockworks.co/news/dubai-3ac-crypto-exchange-opnx">called out the exchange</a> for allegedly advertising its platform without implementing adequate restrictions for Dubai locals.



Read more: <a href="https://blockworks.co/news/dubai-3ac-crypto-exchange-opnx">Dubai reprimands 3AC founders’ new crypto exchange</a>



VARA became aware in February that OPNX was allegedly gathering personal data from the public.&nbsp;



Consequently, the regulator handed a cease and desist directive to the OPNX founding team in April.



Despite implementing certain restrictions, it seemed that UAE residents continued to receive promotions and marketing messages from OPNX.



Reacting to the accusations, Leslie Lamb said OPNX launched in Hong Kong and that the exchange had implemented steps to block UAE residents from accessing and registering on the platform.



“To confirm, we have no Dubai or UAE customers and do full [know-your-customer checks] on all users,” she earlier told Blockworks.



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3AC founders’ crypto project OPNX slapped with $2.7M penalty in Dubai

Co-founders of controversial (and bankrupt) crypto hedge fund Three Arrows Capital have been taken to task over allegedly promoting their new exchange OPNX without securing a local license in Dubai.



They were called out by the Virtual Assets Regulatory Authority (VARA) of Dubai for allegedly promoting their crypto exchange, OPNX, while not ensuring proper restrictions for local residents.



It appears VARA caught wind of OPNX soliciting and collecting personal data from the public in February, according to a <a href="https://www.vara.ae/en/#0" target="_blank" rel="noreferrer noopener">notice</a> published Tuesday. As a result, the regulator issued a cease and desist order to the founders last month.



&#8220;OPNX launched the exchange on opnx.com, providing VA Exchange services — a regulated activity under the VARA regime — without securing any regulatory licences, and as such operating in contravention of local laws,&#8221; VARA said.



Even after applying some restrictions, UAE residents still appeared to have access to OPNX’s promotions and marketing communication.&nbsp;



OPNX, short for Open Exchange, is the latest brainchild of 3AC co-founders Kyle Davies and Su Zhu, alongside the two founders of bankrupt exchange CoinFLEX. All four received the written reprimand from Dubai’s VARA, as well as OPNX CEO Leslie Lamb.



The founders claim that OPNX, which went live on April 4, has <a href="https://blockworks.co/newsletter/issue/31107461" target="_blank" rel="noreferrer noopener">raised $25 million in investment capital</a>. 



After their crypto hedge fund went bust in June last year, Davies and Zhu relocated from Singapore to Dubai, where they were reportedly looking to establish a new operational hub.



Leslie Lamb told Blockworks that OPNX was launched in Hong Kong, and the exchange had taken measures to prevent UAE residents from accessing and signing up for the site.



“To confirm, we have no Dubai or UAE customers and do full KYC on all users,” she told Blockworks in a LinkedIn message.



“We have responded and cooperated with VARA every step of the way and they have invited us to meet with them and discuss the requirements for applying for a VARA license.”



OPNX hopes to not only be a venue for trading crypto, but also crypto-related bankruptcy claims. There’s supposedly a $20 billion market for crypto claims out there that OPNX wants to tap.&nbsp;



Its focus is on bankrupt asset claims, allowing creditors to “unleash their locked claims directly into crypto or use them as margin capital,” according to its website.



The authority’s crackdown on OPNX reflects the trend of emirate regulators adopting a more rigorous stance towards cryptocurrencies amid efforts to establish the region as an industry hot spot.



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Dubai Reprimands 3AC Founders’ New Crypto Exchange

Michael Bodley

The woes of embattled and bankrupt crypto hedge fund firm Three Arrows Capital appear to be worsening.



Co-founders Kyle Davies and Su Zhu — as well as Three Arrows itself were — have been slapped with two fresh subpoenas.&nbsp;



The subpoenas are related to the ongoing bankruptcy of <a href="https://blockworks.co/tag/three-arrows-capital">Three Arrows</a>, whose over-leveraged implosion last year sent shock waves throughout digital asset markets. In an unusual move, the subpoenas — one in the US, one in Singapore — appear to have been served, at least in part, via Twitter. 



The firm issuing both documents confirmed their authenticity, adding that an unredacted copy was also served via email. The whereabouts of both Zhu and Davies have been an open question ever since Three Arrows <a href="https://blockworks.co/news/crypto-trading-blowups-2022">blew up</a>. 



Both legal documents, issued by a collective to liquidate Three Arrows and return capital to the firm’s creditors, list a series of requests for additional information related to the cryptoasset manager’s demise. 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/KyleLDavies?ref_src=twsrc%5Etfw">@KyleLDavies</a> jpg copies of the subpoena are attached to this tweet by way of service. An unredacted copy of the subpoena was served via email and can be provided upon request. <a href="https://t.co/XAYzQ4Oveo">pic.twitter.com/XAYzQ4Oveo</a>&mdash; 3ACLiquidation (@3ACLiq) <a href="https://twitter.com/3ACLiq/status/1611018579532742657?ref_src=twsrc%5Etfw">January 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Those demands include: documents detailing the firm’s dealings, in terms of both investments and engagements with its limited partners and counterparties (including service providers); particulars of investor accounts; Three Arrows&#8217; crypto derivatives trading activity; and a slew of the nuts and bolts behind the firm’s crypto wallets that powered its trading. 



The subpoena is seeking the information in a number of formats, including any “digital communications” (which appears to be a broad remit), as well as internal spreadsheets, accounting data, calendars from Three Arrows executives and details of the firm’s “network access and server activity logs” — among others.



Davies and a lawyer representing the plaintiffs in the liquidation proceedings did not immediately return a request for additional comment.



Representatives for the collective behind the complaint, dubbed Joint Liquidators, in a statement said they “remain focused on diligently advancing the liquidation process for Three Arrows Capital Limited in order to maximize asset recoveries on behalf of creditors.”



“The founders have unfortunately resisted cooperating in these efforts, and as such, we have received authority from courts in both the US and Singapore to serve them targeted and comprehensive discovery demands through email and their frequently-used Twitter accounts,” the statement said. 



It’s far from the first such effort seeking to make creditors whole. A previous demand filed a $30 million claim against the co-founders’ “much wow” <a href="https://blockworks.co/news/3ac-liquidators-file-yacht-claim">super yacht</a>.



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3AC Execs Served Subpoena Via Twitter Due To Whereabouts Unknown

Liquidators appointed to oversee Three Arrows Capital’s bankruptcy said the crypto hedge fund’s co-founders Su Zhu and Kyle Davies are still not cooperating for information, forcing them to investigate and recreate records on their own.



They’re instead providing extensive interviews to media outlets, said liquidator Russell Crumpler. He highlighted conversations with <a href="https://www.bloomberg.com/news/articles/2022-07-22/three-arrows-founders-en-route-to-dubai-describe-ltcm-moment" target="_blank" rel="noreferrer noopener">Bloomberg</a> and <a href="https://www.cnbc.com/video/2022/11/16/three-arrows-capitals-kyle-davies-blasts-ftx-over-the-collapse-of-the-crypto-hedge-fund.html" target="_blank" rel="noreferrer noopener">CNBC</a> in a <a href="https://pacer-documents.s3.amazonaws.com/115/312810/126022478737.pdf" target="_blank" rel="noreferrer noopener">presentation</a> to the bankruptcy court on Friday.



The presentation also included screenshots of tweets posted by Zhu and Davies, made in reference to FTX’s collapse. These were used to indicate both are open to talking publicly, but not to court-appointed liquidators.



Davies appears to have a different version of the story, saying in a <a href="https://twitter.com/KyleLDavies/status/1598964000556953600" target="_blank" rel="noreferrer noopener">tweet</a> on Saturday that the firm’s liquidators refused to engage them “constructively.”



“We invite the liquidators to engage us positively, constructively, and without threats. That would be in the best interest of creditors,” he added.



Liquidators have so far taken over assets worth $35 million in fiat currencies and seized some $2.7 million from forced investment redemptions. They have also taken control of several exchange accounts, over 60 types of digital tokens. The recovered tokens are being held in a custody account under the liquidators’ control.



A more tangible item in liquidators’ crosshairs is the $30 million from the sale of <a href="https://twitter.com/jenwieczner/status/1559185722405711872" target="_blank" rel="noreferrer noopener">the “Much Wow” super yacht</a>, which was allegedly purchased using borrowed funds from 3AC.



Accounts identified by the liquidators showed multiple transfers were made from the fund to pay for the super yacht. But the shipbuilder ultimately terminated the contract because the final amounts owed weren’t paid, and it was resold. Proceeds from the sale are with the shipbuilder but will be redistributed to the Cayman Islands entity, also called “Much Wow,” to which it was registered.&nbsp;



Zhu and Davies have so far communicated with liquidators only twice via teleconference, according to the presentation.&nbsp;



“Founders’ limited cooperation has led to only cursory disclosures of assets and certain agreements,” they said, adding that there has been no complete transfer of records despite a protocol being agreed upon.



Counsel from the law firm representing 3AC’s co-founders didn’t return Blockworks request for comment by press time.



At the time 3AC filed for bankruptcy, the location of either co-founder wasn’t known. It still remains that way, but liquidators alleged in the presentation that they may either be in Bali or the United Arab Emirates — two areas where it’s difficult to impose foreign court orders.&nbsp;



A Singapore high court has ordered the co-founders to cooperate and provide all books, papers or other records in their possession within a week.



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3AC Liquidators File $30M Claim for ‘Much Wow’ Super Yacht

<div id="highlights-block_634e733b10367" class="highlights">
 <ul>
 <li>Co-founders’ Singapore counsel refused to accept papers on behalf of clients, motion states</li>
 <li>Fund’s investment managers have produced only “piecemeal, selective disclosures”</li>
 </ul>
 
</div>



Teneo, the foreign representative of insolvent crypto hedge fund Three Arrows Capital (3AC), has asked for authorization to serve subpoenas for the production of documents and testimony of co-founders Su Zhu and Kyle Davies through unconventional methods, given that they are “yet to offer any forthright cooperation.”



In <a href="https://reorg-research.com//pdf/4083802.pdf" target="_blank" rel="noreferrer noopener">a motion</a> filed on Oct. 14, they asked a US judge to authorize the issue of subpoenas via the founders’ Twitter pages, their email addresses and the email address of Advocatus Law — the Singapore-based counsel “purporting to represent the founders.”



3AC is <a href="https://cms.blockworks.co/3ac-files-for-bankruptcy-as-co-founders-location-unknown/" target="_blank" rel="noreferrer noopener">seeking protection from creditors</a> in the Southern District of New York under Chapter 15, a process that allows foreign debtors to shield assets in the US.&nbsp;



Earlier court documents allege both Zhu and Davies <a href="https://cms.blockworks.co/3ac-co-founders-remain-silent-creditors-go-to-court/" target="_blank" rel="noreferrer noopener">have been uncooperative</a> with liquidators. And as per the latest development, they still seem to be unwilling to engage.



<h3 class="wp-block-heading">Su Zhu and Kyle Davies non-public locations muddle liquidation process</h3>



Since their whereabouts “remain unknown,” the filing stated, foreign representatives requested Advocatus to accept the papers. But the law firm declined to accept service on behalf of its clients.&nbsp;



Advocatus also previously denied Teneo’s requests for an urgent meeting with the founders. While they did offer an introductory Zoom call, neither Zhu nor Davies spoke despite being asked direct questions, Friday’s motion said.&nbsp;



They have refused to cooperate with the liquidators’ efforts to access 3AC’s books and records in their possession, providing only “meager information” that represents an incomplete list of assets and selective disclosures, the filing added.



If granted, the subpoenas would require 3AC’s founders to produce documents to “identify the existence of, location of, and method of accessing and controlling” company assets.



The foreign representatives have also requested <a href="https://www.solitairellp.com/" target="_blank" rel="noreferrer noopener">Solitaire</a>, the Singapore counsel “purporting to represent” 3AC’s former investment manager, for access to other critical information and believes the firm is withholding relevant valuable information.



“The Investment Managers’ piecemeal, selective disclosures are insufficient and their lack of forthright cooperation has hindered the Foreign Representatives’ ability to perform their duties,” the filing said.



Teneo representatives didn’t comment on the matter beyond the court filing. 3AC, Advocatus and Solitaire didn’t return Blockworks’ request for comment by press time.



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3AC Liquidators Want to Subpoena Su Zhu, Kyle Davies via Twitter

<div id="highlights-block_633ea956360dd" class="highlights">
 <ul>
 <li>3AC&#8217;s Starry Night Capital spent over $35 million on NFTs in 2021</li>
 <li>Analytics firm Nansen pegs the current portfolio value of the collectibles at some $860,000</li>
 </ul>
 
</div>



Starry Night Capital, the investment fund focused on NFTs owned by Three Arrows Capital’s (3AC) founders, has moved more than 300 digital collectibles belonging to the now-bankrupt firm.



Teneo, the liquidator behind 3AC’s bankruptcy proceedings, <a href="https://3acliquidation.com/wp-content/uploads/2022/10/221004-Notice-in-Respect-of-Starry-Night-Portfolio.pdf" target="_blank" rel="noreferrer noopener">said</a> on Tuesday that all of the NFTs “have been accounted for and are in our possession or are being transferred to us.”



Starry Night was <a href="https://twitter.com/Vince_Van_Dough/status/1432346847113359361" target="_blank" rel="noreferrer noopener">raised</a> by 3AC and pseudonymous investor Vincent Van Dough last summer with the intention to collect premium NFTs.&nbsp;Data from a <a href="https://dune.com/shogun/3acs-nft-portfolio" target="_blank" rel="noreferrer noopener">Dune Analytics</a> dashboard suggests the fund spent some $35 million on NFTs last year. 



But the collection’s value <a href="https://www.coindesk.com/markets/2022/07/08/three-arrows-wanted-a-100m-nft-collection-instead-its-worth-less-than-5m/" target="_blank" rel="noreferrer noopener">dwindled to $4.2 million</a> by July after the turmoil in crypto markets. Analytics firm <a href="https://twitter.com/nansen_ai/status/1577206932091285504" target="_blank" rel="noreferrer noopener">Nansen</a> estimates that the collection&#8217;s value now stands at 625 ETH (about $861,500 as of press time). 



3AC itself was <a href="https://cms.blockworks.co/three-arrows-capital-ordered-into-liquidation-by-bvi-court-report" target="_blank" rel="noreferrer noopener">ordered</a> into liquidation in late June. The long-serving crypto hedge fund firm had faced numerous <a href="https://cms.blockworks.co/blockfi-says-it-liquidated-a-large-client-amid-3acs-margin-calls/" target="_blank" rel="noreferrer noopener">margin calls</a> across the crypto ecosystem following the collapse of <a href="https://cms.blockworks.co/what-comes-next-for-terra-ecosystem/" target="_blank" rel="noreferrer noopener">Terra</a>. 



3AC had sizable exposure to its native algorithmic stablecoin UST as it depegged from the US dollar, costing it nearly $200 million, <a href="https://www.wsj.com/articles/battered-crypto-hedge-fund-three-arrows-capital-considers-asset-sales-bailout-11655469932" target="_blank" rel="noreferrer noopener">according</a> to co-founder Kyle Davies.



<h3 class="wp-block-heading">Three Arrows Capital fund spent $10M in ether on top five NFTs</h3>



Much of Starry Night Capital&#8217;s NFT portfolio will now be valued below their last purchase price, because ether has dropped over 60%, but Teneo is still likely to recover millions from their liquidation. 



All dollar values represent sale prices at the time of trade (images sourced from OpenSea).



<h4 class="wp-block-heading">Pepe the Frog NFT Genesis Artist: Matt Furie</h4>



Sold for: 1,001 ETH ($3.5 million) on Oct. 5, 2021



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="796" height="1024" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png" alt="Three Arrows Capital NFTs" class="wp-image-33693" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=796 796w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=233 233w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=200 200w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=203 203w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=170 170w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=62 62w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=39 39w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-3-796x1024.png?w=1000 1000w" sizes="(max-width: 796px) 100vw, 796px" /></figure>



<h4 class="wp-block-heading">Some Other Asshole Artist: XCOPY</h4>



Sold for: 550 ETH ($2.3 million) on Dec. 5, 2021



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1000" height="1000" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png" alt="" class="wp-image-33690" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=1000 1000w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0.png?w=50 50w" sizes="(max-width: 1000px) 100vw, 1000px" /></figure>



<h4 class="wp-block-heading">DANKRUPT Artist: XCOPY</h4>



Sold for: 469 ETH ($2 million) on Oct. 24, 2021



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="819" height="1024" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png" alt="Three Arrows Capital NFTs" class="wp-image-33694" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=819 819w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=240 240w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=206 206w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=209 209w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=175 175w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=64 64w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=40 40w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-4-819x1024.png?w=1000 1000w" sizes="(max-width: 819px) 100vw, 819px" /></figure>



<h4 class="wp-block-heading">DECAY Artist: XCOPY</h4>



Sold for: 345.69 ETH ($1.4 million) on Dec. 5, 2021



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1000" height="636" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png" alt="Three Arrows Capital NFTs" class="wp-image-33691" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=1000 1000w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=404 404w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=410 410w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-1.png?w=50 50w" sizes="(max-width: 1000px) 100vw, 1000px" /></figure>



<h4 class="wp-block-heading">AI Generated Nude Portrait #7 Frame #184 Artist: Robbie Barrat</h4>



Sold for: 300 ETH ($1.1 million) on Oct. 5, 2021



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1000" height="1000" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png" alt="" class="wp-image-33692" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=1000 1000w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/10/pasted-image-0-2.png?w=50 50w" sizes="(max-width: 1000px) 100vw, 1000px" /></figure>



3AC’s Starry Night Capital had transferred all of its <a href="https://cms.blockworks.co/3ac-co-founders-remain-silent-creditors-go-to-court/" target="_blank" rel="noreferrer noopener">NFTs to a single wallet</a> in June, prompting speculation about an upcoming fire sale. Over the last two days, the NFTs have been transferred to a <a href="https://opensea.io/0xbedDF3e43015f5221F5d1Ac0fD0d2Ab3352D2f7B" target="_blank" rel="noreferrer noopener">new Gnosis Safe address</a> now in Teneo’s possession.



The liquidator appreciated Van Dough’s cooperation in getting access to the NFTs and ensuring that they weren’t disposed improperly or without authorization from the bankruptcy court. Van Dough is also likely to assist with the final sale of the NFTs, it added.



It isn’t clear yet how much the NFTs will be sold for. Teneo is subsequently expected to share further details on the NFT liquidation process.



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Most Expensive Three Arrows Capital NFTs To Be Liquidated

<div id="highlights-block_62d6b41c69b96" class="highlights">
 <ul>
 <li>3AC traded cryptocurrencies instead of responding to margin calls from lenders, according to a court document</li>
 <li>Digital Currency Group, parent company of Genesis, is the fund’s top creditor with a $1.2 billion claim</li>
 </ul>
 
</div>



A <a href="https://www.docdroid.net/xKIqrjq/20220709-3ac-bvi-liquidation-recognition-1st-affidavit-of-russell-crumpler-filed-pdf#page=13" target="_blank" rel="noreferrer noopener">1,157-page affidavit</a> drafted by liquidator Russell Crumpler and published by Three Arrows Capital’s (3AC) restructuring firm Teneo reveals several details about the embattled crypto hedge fund.



Co-founders Su Zhu and Kyle Davies made a down payment on a yacht worth $50 million, the document shows. The yacht was meant to be delivered in Italy sometime within the next two months, when the remaining payment would be due, according to one affidavit put forth by Blockchain.com, which reportedly lent <a href="https://www.coindesk.com/business/2022/07/08/crypto-exchange-blockchaincom-faces-250m-hit-on-loans-to-three-arrows-capital/" target="_blank" rel="noreferrer noopener">$270 million</a> to the crypto hedge fund.



Davies is said to have intended it to be “larger than any yacht owned even by Singapore’s richest billionaires.”



The co-founders are believed to have made the payment using borrowed funds while ignoring creditors’ attempts to contact them. The filing also shows Zhu and his wife purchased two Singapore “good class” bungalows — or prestigious housing — for between $28.5 million and $48.8 million in the last two years. These assets were provided as evidence that the co-founders may have been using company assets for personal purchases.



“The founders of the clearly insolvent company should not be allowed to deal with what may be assets of the company,” liquidators wrote.



Liquidators also say 3AC continued to trade cryptocurrencies instead of responding to margin calls from lenders. Separately, the fund is believed to have transferred $31 million in stablecoin USDC and $900,000 in USDT on 14 June to Cayman Islands-based company Tai Ping Shan Limited, which is owned by Zhu and Kyle Davies’ partner Kelly Kaili Chen.



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/ZIfYP63mDhgsYXqL7exFbaMIq093KnG3Xq-m7Ij9tKF2Vxhh04SG-h3cbUj_ytWP2H9mNeQcyUNMkcLl-Z6CChSu0okWUQND1jUDw41bhpQg7u9F3M0gd38QbmpDwgVoXJILJpX7SHUEQNr6WRzSmLM" alt=""/><figcaption>Source: Affidavit by Teneo’s Russell Crumpler</figcaption></figure>



Both Kaili Chen and Zhu are among more than 20 creditors that lent money to 3AC.



<h3 class="wp-block-heading">Liquidators ask for access to 3AC’s Singapore office as creditors list millions in claims</h3>



The filing shows 3AC owes $3.5 billion to about 27 crypto firms. Its biggest creditor is crypto brokerage Genesis, which loaned the fund $2.3 billion. Once 3AC failed to meet a margin call in June, <a href="https://cms.blockworks.co/genesis-reveals-exposure-to-bankrupt-three-arrows-capital/" target="_blank" rel="noreferrer noopener">Genesis sold collateral</a> and hedged its downside, CEO Michael Moro said in a Twitter thread earlier this month. 



Digital Currency Group, the parent company of Genesis, has filed a claim of $1.2 billion, nearly double Voyager Digital’s $674 million claim. Crypto exchange Deribit has an $80 million claim under the name DRB Panama, Kaili Chen’s claim amounts to $65.7 million and Celsius’ total claims come to about $40 million. Zhu himself has a $5 million claim.



Crumpler has asked for access to 3AC’s office, hoping liquidators will have some way to obtain cold wallets or information on the trading accounts of the company in order to freeze assets. “To prevent these from being removed, destroyed, damaged or modified (by Su Zhu, Kyle Davies or any other person with access), it is imperative that the Liquidators be granted immediate access.”



A filing from July 8 said Christopher Farmer, a senior managing director at Teneo, visited the Singapore office but <a href="https://cms.blockworks.co/3ac-co-founders-remain-silent-creditors-go-to-court/" target="_blank" rel="noreferrer noopener">found it empty</a> with unopened mail pushed against the door. The office had occupants as recently as May or early June 2022, according to Farmer’s account, citing people working nearby. Meanwhile, according to the liquidators, Zhu and Davies haven’t been cooperating or answering questions posed to them.



Zhu <a href="https://twitter.com/zhusu/status/1546801270014758912?s=20&amp;t=2QWEHxSOG-afQ77XJJHriA" target="_blank" rel="noreferrer noopener">disputed this on Twitter</a>. In his first public communication in almost a month, he said on July 12, “Sadly, our good faith to cooperate with the Liquidators was met with baiting.”



3AC didn’t return Blockworks’ request for comment by press time.



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3AC Co-founders Used Fund’s Assets for $50M Yacht, Bungalows

<div id="highlights-block_62cd63d5c2a7e" class="highlights">
 <ul>
 <li>The co-founders were set to attend a virtual court hearing on Tuesday, but they aren’t expected to show up</li>
 <li>Zhu referred to as-yet-unnanounced token from Starkware that 3AC was in line to receive</li>
 </ul>
 
</div>



Three Arrows Capital’s co-founders Su Zhu and Kyle Davies are still not ready to oblige the fund’s liquidators after being <a href="https://cms.blockworks.co/3ac-co-founders-remain-silent-creditors-go-to-court/" target="_blank" rel="noreferrer noopener">accused of not cooperating</a> with them meaningfully.



Zhu expressed annoyance in a <a href="https://twitter.com/zhusu/status/1546801270014758912?s=20&amp;t=7fpq4rRXSTuqJUeX8YN1Zg" target="_blank" rel="noreferrer noopener">tweet</a> Tuesday that included screenshots of his lawyer’s emails to Russell Crumpler, a Three Arrows Capital (3AC) liquidator. The co-founder provided the update about a month after <a href="https://twitter.com/zhusu/status/1536876343815983104" target="_blank" rel="noreferrer noopener">acknowledging</a> that the crypto hedge fund was in trouble.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Sadly, our good faith to cooperate with the Liquidators was met with baiting. Hope that they did exercise good faith wrt the StarkWare token warrants. <a href="https://t.co/CF73xI8r6n">pic.twitter.com/CF73xI8r6n</a>&mdash; Zhu Su 🔺 (@zhusu) <a href="https://twitter.com/zhusu/status/1546801270014758912?ref_src=twsrc%5Etfw">July 12, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Christopher Anand Daniel, a managing partner at Singapore-based law firm Advocatus, claimed in the email that Crumpler was “baiting” Zhu and Davies by informing a US court about their alleged non-cooperation.



<blockquote class="wp-block-quote">“This is highly disappointing, and our clients will take such steps as are necessary to seek the appropriate sanctions,” Daniel wrote.</blockquote>



Lawyers acting on behalf of the fund’s creditors want to freeze 3AC’s assets as part of the <a href="https://cms.blockworks.co/three-arrows-capital-ordered-into-liquidation-by-bvi-court-report/" target="_blank" rel="noreferrer noopener">liquidation process</a> it was recently ordered into. But they aren’t ready to just yet without getting the full picture of the fund’s bank accounts, derivatives contracts and other records.



Those lawyers allege both co-founders haven’t begun to cooperate with them in any meaningful manner, saying they were both mute with videos turned off on a July 8 Zoom call.&nbsp;



In a move to explain why his clients have been preoccupied, Daniel alleged that the co-founders and their families have received “threats of physical violence” and had to handle queries from the Monetary Authority of Singapore in the last week.



He said a spreadsheet detailing 3AC’s assets was attached to the email, adding that Zhu and Davies are working to provide more documents “on a rolling basis.”&nbsp;



A US court had set a hearing for Tuesday, July 12 at 9 am ET (9 pm in Singapore) via video conference, according to an emergency motion filed in New York last week. But it appears the co-founders won’t be attending that call, according to Daniel’s email.



“In light of the foregoing, our clients will not be proceeding with the call this evening, Singapore time,” he wrote. “Depending on your response, we will let you know when our clients can reasonably be expected to speak with you.”



In a separate email, Daniel accused the liquidators of failing to exercise a StarkWare token offer by July 5 that had been agreed upon. He said this omission “caused the company to lose substantial value.” 3AC has invested in the Ethereum layer-2 developer StarkWare, according to its <a href="https://www.threearrowscap.com/select-investments/" target="_blank" rel="noreferrer noopener">website</a>, but a token for the protocol has not yet been released.



Davies has been subpoenaed to provide testimony and submit documents via video conference on July 19.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Update on July 12, 2022, at 11:45 am ET: Judge Martin Glenn ordered that 3AC&#8217;s assets in the US should not be transferred or disposed of and also authorized the Foreign Representatives to issue subpoenas in the course of their investigation.



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3AC’s Zhu and Davies To Skip Liquidators’ Court Hearing, Email Shows

<div id="highlights-block_62cbf0081e3c6" class="highlights">
 <ul>
 <li>The hedge fund’s Singapore office was found vacant except for idle computer screens, a court filing said</li>
 <li>Lawyers said people identifying as 3AC’s co-founders were mute and unseen on a Zoom call</li>
 </ul>
 
</div>



The co-founders of crypto hedge fund Three Arrows Capital are not cooperating with liquidators, leaving its creditors scrambling to locate and freeze the company’s assets.



Three Arrows Capital (3AC) was <a href="https://cms.blockworks.co/three-arrows-capital-ordered-into-liquidation-by-bvi-court-report/" target="_blank" rel="noreferrer noopener">ordered into liquidation</a> by a British Virgin Islands court less than two weeks ago. Now lawyers acting on behalf of the fund’s creditors have said co-founders Su Zhu and Kyle Davies “have not yet begun to cooperate with the Foreign Representatives in any meaningful manner,” court documents filed late Friday showed.



A court hearing in New York is scheduled for 9 am ET on Tuesday.



People identifying as “Su Zhu” and “Kyle” were present on a Zoom call on July 8, but their video and audio were turned off throughout, with neither speaking despite being asked direct questions, the filing said. Any dialogue was conducted by Singapore-based legal representatives Advocatus Law LLP and Solitaire LLP, according to the court records.



Subsequently, Davies was subpoenaed to provide testimony via video conference and submit documents on July 19.



Christopher Farmer, a managing director at restructuring firm Teneo, found Three Arrows’ office in Singapore to have “appeared vacant except for a number of inactive computer screens,” lawyers said, adding that he also found unopened mail pushed against or under the door. People in nearby offices spotted occupants in the office as recently as May or early June 2022, they said.



The lawyers added Zhu is rumored to be involved in the sale of property in Singapore. Singaporean real estate firm EdgeProp <a href="https://www.edgeprop.sg/property-news/liquidators-trying-seize-properties-owned-three-arrows-capital-co-founders-what-does-co-founder-zhu" target="_blank" rel="noreferrer noopener">reported</a> the property was purchased in trust of Zhu&#8217;s 3-year-old son and valued at about $49 million.



“Notwithstanding the lack of engagement by the Founders, the Foreign Representatives have been pursuing their investigation with urgency and by all lawful means available to them,” the filing said.



A major risk to non-cooperation is that a sizeable portion of 3AC’s assets — made up of cash, cryptocurrencies and NFTs — is easily transferable, the lawyers wrote. So far, NFTs (non-fungible tokens) belonging to 3AC’s Starry Nights Capital have already <a href="https://thedefiant.io/starry-night-goes-dark/" target="_blank" rel="noreferrer noopener">reportedly</a> been transferred to a new wallet.



Before moving to freeze the fund, the lawyers want the court to subpoena 3AC’s co-founders to list their assets — including wallets, bank accounts, derivatives contracts, securities and other company records.



3AC is at the center of a liquidity crisis in the cryptocurrency market, as it triggered a wave of contagion and fallout at some of the industry’s highest-profile names, from whom it borrowed significantly. After initial speculation about <a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">3AC’s insolvency</a> grew, many firms attempted to assuage investor fears that they didn’t have exposure to the fund.



Representatives for 3AC <a href="https://cms.blockworks.co/3ac-files-for-bankruptcy-as-co-founders-location-unknown/" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> on July 1, citing a collapse in business arising from extreme market fluctuations. Lawyers from Latham &amp; Watkins wrote that they weren’t aware of the co-founders’ locations and that they were rumored to have left Singapore.&nbsp;



“Three Arrows borrowed unsustainably large amounts of money to put into different digital asset products, and so their extensive fingerprint means that we might be forced to reckon with more liquidations here,” said Les Borsai, co-founder at Wave Financial. “I think, though, that the contagion effect has mostly been mitigated.”



3AC had not returned Blockworks’ request for comment by press time.



Macauley Peterson contributed reporting for this story.



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3AC Co-founders Remain Silent, Creditors Go to Court

<div id="highlights-block_62bff55e568c3" class="highlights">
 <ul>
 <li>Three Arrows Capital has collapsed in the wake of extreme crypto market fluctuations, the petition said</li>
 <li>Nansen estimated 3AC managed $10 billion in assets as of April, but the petition shows it held just $3 billion at the same time</li>
 </ul>
 
</div>



Less than a week after being ordered into liquidation by a British Virgin Islands court, crypto hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy on Friday.



Representatives from law firm Latham &amp; Watkins filed the petition in a New York court, according to <a href="https://www.scribd.com/document/580739357/show-temp" target="_blank" rel="noreferrer noopener">court documents</a>.



“The debtor’s business has collapsed in the wake of extreme fluctuations in cryptocurrency markets,” representatives wrote, adding that they aren’t aware of the current location of 3AC’s co-founders, Zhu Su and Kyle Davies.



“The foreign representatives understand and believe that while the debtor has had certain operations in Singapore, Mr. Davies and Mr. Zhu’s current location remains unknown. They are rumored to have left Singapore.”



Zhu’s last <a href="https://twitter.com/zhusu/status/1536876343815983104" target="_blank" rel="noreferrer noopener">Twitter update</a> was on June 15 — when he appeared to address rumors of insolvency — while Davies has provided no word on the matter himself.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We are in the process of communicating with relevant parties and fully committed to working this out&mdash; Zhu Su 🔺 (@zhusu) <a href="https://twitter.com/zhusu/status/1536876343815983104?ref_src=twsrc%5Etfw">June 15, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Singapore-based 3AC is among the highest-profile cryptocurrency firms to have crumbled under pressure and faced liquidity issues driven by the market sell-off in recent weeks. Foreign companies — based outside the US — employ Chapter 15 to secure bankruptcy protection by blocking creditors from taking legal action.



While blockchain analytics firm Nansen is <a href="https://www.bloomberg.com/news/articles/2022-04-07/three-arrows-capital-s-su-zhu-remains-bullish-on-crypto-investments" target="_blank" rel="noreferrer noopener">reported</a> to have said 3AC held $10 billion in assets as recently as April, the petition alleges the firm held just $3 billion in assets around the same time.



Days before filing for bankruptcy, a British Virgin Islands court ordered 3AC to <a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">liquidate its assets</a>. Two operatives from advisory firm Teneo Restructuring were appointed to manage its insolvency, Blockworks learned. One source said Teneo would set up a website through which creditors can make claims against the firm.


<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="482" height="238" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg" alt="" class="wp-image-23837" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=482 482w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/2022-07-02-3AC-founders.jpg?w=50 50w" sizes="(max-width: 482px) 100vw, 482px" /><figcaption>3AC co-founders <a href="https://twitter.com/kyleldavies?lang=en" target="_blank" rel="noreferrer noopener">Kyle Davies</a> and <a href="https://twitter.com/zhusu" target="_blank" rel="noreferrer noopener">Zhu Su</a></figcaption></figure></div>


Three Arrows, founded in 2012 by classmates Zhu and Davies, handles cryptoasset hedge funds and venture capital and is known for its highly-leveraged bets. According to its <a href="https://www.threearrowscap.com/select-investments/" target="_blank" rel="noreferrer noopener">website</a>, 3AC’s investments include decentralized finance projects such as Aave and Lido, and play-to-earn project Axie Infinity. 



Chris McCann, a partner at venture capital firm Race Capital, told Blockworks in a recent interview that 3AC is an example of a firm trying to be both a crypto hedge fund and a crypto venture capital fund. 



“This is like the worst of both worlds,” he said, adding that firms like 3AC and Celsius have framed themselves as decentralized. “You have people fundamentally not building on a blockchain, not being transparent about stuff and not taking all of the core tenants that everybody takes for granted in the space, while calling themselves Web3 firms and using all the capital that they raise for external, exogenous things.”



“I&#8217;ve always just felt very uncomfortable about them, even in the beginning,” he said.



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3AC Files for Bankruptcy as Co-founders’ Location Unknown

Casey Wagner

<div id="highlights-block_62acf618a8066" class="highlights">
 <ul>
 <li>A DeFi protocol backed by Three Arrows Capital says the fund controlled a large portion of its treasury</li>
 <li>The protocol has not received any communication from Three Arrows co-founders or the TPS Capital Team since liquidation speculation began</li>
 </ul>
 
</div>



A decentralized finance protocol backed by the now-unraveling Three Arrows Capital has a significant portion of its treasury unaccounted for. It has not heard from the Three Arrows team this week, according to the protocol’s founder, who agreed to speak with Blockworks on the condition of anonymity.&nbsp;



The protocol closed a seed funding round, led by Three Arrows, in 2021. As part of the round, the protocol received stablecoins USD Coin and Tether, which the company could have either actively managed by lending it on a decentralized market or opted to keep all or a portion of it with TPS Capital, Three Arrow’s over-the-counter trading desk. 



Three Arrows guaranteed 8% annual returns on this treasury management service. Because of the high yields, many protocols backed by Three Arrows decided to keep their funding round capital, plus portions of their own treasuries, with Three Arrows, the founder said.&nbsp;



It felt like the safer option, the protocol’s founder said, compared to the alternative — deploying the capital through risky smart contracts. The decision was further validated when it was unaffected by Terra’s collapse, but now, a notable chunk of the protocol’s treasury is unaccounted for.&nbsp;



Speculation about Three Arrows’ insolvency began Tuesday following a <a href="https://twitter.com/zhusu/status/1536876343815983104?s=20&amp;t=jlFr6g4vb-tke25WJdd1VQ" target="_blank" rel="noreferrer noopener">cryptic Tweet</a> from co-founder Su Zhu. <a href="https://www.theblock.co/linked/152092/after-facing-hundreds-of-millions-of-dollars-in-liquidations-three-arrows-capitals-future-is-uncertain" target="_blank" rel="noreferrer noopener">The Block</a> later reported Three Arrows was scrambling to find funds to repay lenders and other counterparties after major liquidations.



The protocol has not received any communication from Three Arrows co-founders Zhu and Kyle Davies or the TPS Capital team since June 10, the founder said.&nbsp;



The founder said that the protocol is weighing its legal options and has been in contact with two other Three-Arrows-backed protocols that face the same uncertainty about the state of their treasuries.&nbsp;



Another Three Arrows-backed protocol confirmed with Blockworks that the fund asked to manage its treasury, an offer the protocol declined.&nbsp;



This is a developing story.



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