The liquidators of Three Arrows Capital are urging the founders of the Singapore-based bankrupt crypto hedge fund to practise what it preached to the former chief executive officer (CEO) of FTX, Samuel Bankman-Fried, that he make transparent disclosure on the collapse of his crypto company.
Three Arrows filed for bankruptcy protection in the US Bankruptcy Court of the Southern District of New York on July 1. On Nov 30, the Singapore High Court issued an order granting discovery for the founders of Three Arrows, Kyle Davies and Zhu Su, as well as an unnamed former investment manager to produce affidavits on Three Arrows together with all books and other records in their possession, according to a presentation filed by the
liquidators at the US Bankruptcy Court.
On De 6, the US judge presiding over the bankruptcy proceedings of Three Arrows approved subpoenas for Su and Davies, which enables the liquidators to request information related to Three Arrows since 2012, reported Decrypt.
FTX, once the world’s third-largest crypto exchange, filed for bankruptcy protection in the US on Nov 11, when its co-founder Samuel Bankman-Fried resigned as its CEO. Temasek’s loss of its entire US$275 million (S$373 million based on the conversion rate of Oct 6) investment in FTX was discussed in Singapore Parliament on Nov 30.
Three Arrows’ founders have repeatedly failed to engage substantially with the liquidators, with only limited discussions and no transfer to the liquidators of a complete set of records of the company, the liquidators alleged in the presentation.
“Founders’ calls for truth should be heard,” ran an ironic headline in the presentation.
The presentation contained a tweet by Su on Nov 17 saying, “The time for the truth to surface is now.”
The presentation cited a tweet on Nov 24 by Davies urging Bankman-Fried, “If you really have nothing to hide, let’s chat, with transparency, in a forum where those you have inflicted pain upon, can tune in.”
In another tweet on Nov 24 mentioned by the presentation, Davies said, “(Samuel Bankman-Fried) I know you’ve got a lot on your plate, but you’ve had the time to write multiple letters, and even sign up for a CNBC interview.”
Ironically, in the presentation, the liquidators allege the founders of Three Arrows engaged with the media but not the liquidators. On Nov 16, Davies appeared on CNBC to discuss the bankruptcy proceedings of Three Arrows and the collapse of FTX, the presentation pointed out.
“Singapore counsel provided email addresses to contact the Founders; however, the Founders and their counsel have not been responsive to Liquidators’ communications,” the
presentation alleged.
On Dec 3, Davies tweeted, “Unfortunately our Liquidators seem to refuse to engage us constructively. After months, cash in a bank account, minimal asset sales, there have still been no disbursements to creditors. Let us speak openly with all creditors to find a better way forward.”
In his interview with CNBC on Nov 16, Davies said he was in Bali and denied he chose to be on the Indonesian island because Indonesia would not extradite him to the US.
Davies told CNBC he has been cooperating with the liquidators and laid part of the blame for the collapse of Three Arrows on FTX. Kyle told the US television news station that one of the biggest critics of Three Arrows right after its collapse was Bankman-Fried, yet Bankman-Fried hunted Three Arrows’ positions. Hunting a position means conducting trades which force another party to liquidate its holdings of securities.
The presentation cited a retweet by Su of a tweet by someone else on Nov 12, saying Bankman-Fried “destroyed himself in revenge against Su. Poetry.”
In an interview with CNBC on Nov 30, Bankman-Fried said he had never tried to commit fraud.
Much Wow Superyacht
The liquidators of Three Arrows have taken control of currencies totalling US$35.6 million held in Singapore banks and/or the company’s lawyers, according to the presentation.
The liquidators said they discovered multiple transfers of funds from Three Arrows to pay for a superyacht named “Much Wow”, which is owned by a Cayman Islands company, Much Wow Limited. The contract for Su and Davies to buy this superyacht was terminated because the final instalment payments were not made and the company owning the superyacht is under liquidation for US$30 million, according to the presentation.
An article in New York Magazine on Aug 15 said, “Her would-be captains showed off pictures of the US$50 million vessel at parties, bragging that it would be “bigger than all of the richest billionaires’ yachts in Singapore” and describing plans to adorn the staterooms with projector screens, creating a waterborne gallery for their growing collection of digital art in the form of NFTs (non-fungible tokens).”
In July, when the superyacht was set to launch, Three Arrows filed for bankruptcy protection, while Su and Davies disappeared from Singapore, said New York Magazine. The
Twitter accounts of Su and Zhu said they are in Dubai, United Arab Emirates (UAE).
While Su and Davies portrayed Three Arrows as a victim, other crypto firms are reported to be victims of Three Arrows. Voyager Digital, a listed crypto exchange based in New York, filed for bankruptcy protection in July, saying Three Arrows owed it more than US$650 million, said New York Magazine. Blockchain.com, a crypto wallet company headquartered in Luxembourg, faces US$270 million in unpaid loans from Three Arrows and has retrenched a quarter of its staff, New York Magazine added.
Toh Han Shih is chief analyst of Headland Intelligence, a Hong Kong risk consulting firm.