In a recent report, the American-based advisory firm Teneo confirmed that assets totaling around $1.4 billion had been frozen linked to the now-defunct hedge fund Three Arrow Capital (3AC). The decisive action to freeze the multi-million dollar capital aimed at barring the co-founders of 3AC, Su Zhu and Kyle Davies, from accessing the funds amid the ongoing legal charges against the two. 

The court report illustrated that the decision to freeze billions of assets aimed at preventing the 3AC co-founders and Kelly Chen, Kyle’s wife, from engaging in any business activity that might compromise the ongoing legal action.

Three Arrow Liquidators Seeks to Recover Lost Assets

A statement from the Teneo team stated that the decision to freeze the funds stemmed from a request from the 3AC liquidators. In the report, the Teneo team claimed that the 3AC top-level officials led by Kyle and Zhu were accountable for the collapse of the 3AC.

The advisory team noted that the disgraced crypto investor affected by the fallout of 3AC lost a substantial amount of funds that exceeded the amount frozen. Since last year, the Teneo team has engaged in an intensive legal battle to repay the creditors’ assets worth approximately $3.5 billion. 

The impressive move by Teneo supported the liquidation of the embattled hedge fund as instructed by the British Virgin Islands court in June 2022. Despite the court ruling, the Teneo team has faced multiple challenges in the attempt to recover the customer’s funds.

A recent report from the advisory team demonstrated that the 3AC founders have been uncooperative during ongoing legal charges.  

3AC Liquidators to Focus on Actualizing Restructuring Plan

In an earlier report, the lawyers from Teneo requested the court to instruct Zhu and Kyle to cooperate with the ongoing investigation. According to the report, the Teneo team regretted that the 3AC top executive failed to disclose critical information.

 The non-compliance of the two crypto fugitives attracted the attention of global regulatory agencies. Based on the case’s complexity, Kyle issued a defensive statement concerning his unwillingness to cooperate with the ongoing investigation. 

The report revealed that after Kyle relocated to Singapore, he renounced his American citizenship. Citing the requirements for the renunciation of the US citizenship, Kyle claimed it was unnecessary to be questioned by the US authorities. 

Despite the court ruling, a source familiar with the situation revealed that the 3AC co-founders continued to gain financial benefits from the bankrupt hedge fund. The discovery of Zhu and Kyle’s noncompliance obliged the Teneo legal team to hold intense discussions with the 3AC creditors. 

Overview of 3AC Saga

After a series of meetings with the disgraced crypto investors, the Teneo recovered company assets, including $35.6 million in cash, a yacht worth $3 million, and measurable amounts of nonfungible tokens (NFTs). Following an intensive activity to recover the company assets, the Teneo team regretted that the recovered amount could not repay the 3AC creditors.

 The lawyers noted that the fallen hedge fund exposed the 3AC creditor to loss of $3.5 billion. The unbalanced financial statement at 3AC emanated from overexposure to Terra stablecoins UST, which entered an inflationary death spiral last year. 

The collapse of the Terra ecosystem exposed 3AC to bankruptcy. In an earlier interview with Bloomberg, the 3AC co-founders admitted that they had invested heavily in Terra. At that time, the co-founder of Terraform Labs, Do Kwon, hyped the UST, assuring the investors that his project would generate substantial returns. 

Months after the Bloomberg interview, the co-founder of 3AC went into hiding after receiving multiple death threats. After a long chase, Zhu was arrested at an airport in Singapore, attempting to flee the country.

 A review of the court report revealed that Zhu received four months of imprisonment and might be released before the end of this year after he potrayed changes in behavior. Besides the 3AC, the crashing of the Terra ecosystem plunged key market players such as BlockFi, Voyagers, and Celsius into financial woes. 

Editorial credit: rafapress / Shutterstock.com