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Three Arrows Capital (3AC) co-founder Kyle Davis should be charged with contempt of court for ignoring a subpoena related to a bankruptcy proceeding, June 14 court documents from 3AC’s board of creditors show. According to a lawyer for 3AC creditors, Davis is deliberately delaying the return of assets from a former cryptocurrency hedge fund.
Civil sanctions against Davis for his contempt include the award of attorney fees and a $10,000 daily fine until execution. The petition does not apply to Su Zhu, the co-founder of the bankrupt hedge fund. Because of his Singaporean citizenship, Zhu is not subject to the jurisdiction of the United States courts, Teneo, the firm acting as liquidator in the case, has learned from Cointelegraph.
On January 5, Davis and Zhu were subpoenaed on Twitter for not being involved in asset recovery after 3AC filed a Chapter 15 lawsuit in July 2022. Since then, creditors have accused the founders of “running away” from bankruptcy court.
The location of founders and legal jurisdiction play an important role in recovery issues. For example, the liquidators had to obtain permission from the authorities of Singapore and the United States to subpoena Davis and Zhu via digital channels.
Three Arrows founders Kyle Livingston Davis and Su Zhu […] repeatedly violated their obligations to the court and refused to cooperate with the efforts of foreign representatives to dispose of the assets of the Debtor, ”the document says. A hearing on the petition is due in the coming weeks.
According to the liquidators, instead of complying with subpoenas and information requests, “the founders ignored their obligations, concealed their location, and instead spent their time, among other things, creating a new venture to trade claims in cryptocurrency bankruptcy cases.”
The petition also asks the United States to seek personal jurisdiction over Davis, who is believed to be in Bali. “[…] It could not be clearer in this record that the Court can – and should – exercise personal jurisdiction over Davis, charge him with willful contempt of court and impose sanctions.”
An auction of parts of a collection of non-fungible 3AC tokens held last month raised $2.5 million. The firm reportedly owes a total of $3.5 billion to creditors. During its peak, 3AC’s estimated assets under management reached $10 billion.