3AC bankruptcy process faces challenges amid unknown whereabouts of founders

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

Liquidators for Three Arrows Capital (3AC) will have to present further documents to grant the 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 in the process claimed that Zhu Su and Kyle Davies, founders of the hedge fund, repeatedly failed to engage with liquidators in the past months. “A communication protocol was agreed between the Liquidators and Founders, but has not yielded satisfactory cooperation,” according to a hearing presentation.

Liquidators claimed the founders of the company are located in Indonesia and the Emirates, which have difficulty enforcing foreign court orders.

The founders had also refused to accept service through their Singapore counsel, which led the liquidators to seek alternative means to subpoena Su and Davies, Cointelegraph reported on Oct. 18. On the same day, Bloomberg disclosed that U.S. regulators were launching a probe into possible legal violations by 3AC, on 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 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 be possible only 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 has custody of the NFTs 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 Singapore 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 US dollar as needed.

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