It’s been a painful time for Three Arrows Capital (3AC), with the crypto hedge fund in the midst of a fatal bankruptcy filing. The company is melting down in the face of the cryptocurrency market crash; the ensuing bankruptcy, ordered liquidation and wild goose chase prompted by 3AC’s founders, though, has made the event one of the most high-profile stories of the year. The spectacle drags on still this week, with liquidators still attempting to just get ahold of the company’s assets. Meanwhile, multiple creditors and a 3AC founder himself have filed suits against the company.
The hedge fund found itself in the eye of the crypto meltdown beginning in May; when prices began to drop massively, 3AC was unable to pay back any of the many lenders it borrowed from. These lenders included companies like BlockFi and Voyager Digital, the former of which required a $240 million bailout from FTX and the latter went bankrupt.
The volatile nature of crypto makes this story an unsurprising one. The real interest is coming from the company’s handling of bankruptcy proceedings. After a Bahaman court ordered the liquidation of 3AC’s assets, founders Su Zhu and Kyle Davies have vanished. Creditors sent to assist the company with its liquidation arrived to an abandoned Singapore office. Last week, the Zhu broke his radio silence to bash these liquidators for “baiting” them.
Zhu and Davies have been unaccounted for and unwilling to allow the court to know the scope of its assets. The two have been shuffling these assets across wallets and exchanges. The moves are prompting liquidators to petition the Singapore court to freeze the assets.
Three Arrows Capital Expecting Suits From Creditors
Three Arrows Capital initially filed for its Chapter 15 bankruptcy protection as a way to prevent litigation from the many creditors wronged by the company’s failing. Thanks to the runaround liquidators are getting from Zhu and Davies, though, the clock is fast winding down on the process. As one of the company’s 27 creditors announces their intent to take their grievances to court over Twitter, these liquidators are hoping to buy more time.
One of the biggest new pieces of information in this case comes by way of Genesis Asia Pacific. As investors are just discovering today, Genesis is the biggest creditor to 3AC. Originally, Genesis reported losses of hundreds of millions of dollars. However, new reports show 3AC owes the company $2.36 billion, far more than originally though. Thus, Genesis is handily the largest creditor to the company, which owes a total of $3.5 billion.
Algorand (ALGO-USD) is another creditor, one who is already announcing plans to take the company to court in order to recoup its assets. Over social media, Algorand says it entered a one-off trade with 3AC, and believes the company violated lock-up terms associated with the transaction. It adds that it will be seeking remuneration, and asserts that it never supplied 3AC with any unsecured loans.
All-in-all, investors close to the matter report at least 12 different claims filed against 3AC by creditors. In addition to the Algorand claim, BlockFi and also-bankrupt Celsius (CEL-USD) are seeking remuneration. Curiously enough, founder Su Zhu also filed a $5 million claim against his own company this week.
In the wake of 3AC’s unresponsiveness, creditors are asking the court for an extending stay on claims against the company. This will buy the team time as they attempt to get a freeze on Three Arrows’ assets. Then, they can get a better look at what they’re dealing with.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
