Key takeaways :
- Su Zhu and Kyle Davies, the co-founders of 3AC, are being sued for $1.3 billion by the company’s liquidators.
- The liquidators, partners at the consulting firm Teneo, spoke with the creditors of Three Arrows about the accusations.
3AC Liquidators, a financial firm overseeing the liquidation process of a bankrupt hedge fund, has initiated legal action to recover $1.3 billion from the founders of the defunct fund.
This significant development marks a crucial step in the ongoing legal proceedings surrounding the collapse of the hedge fund, aiming to recoup losses for the investors involved.
Su Zhu and Kyle Davies, the co-founders of the failed hedge fund Three Arrows Capital (3AC), are reportedly being sued by Teneo, the liquidator, to collect around $1.3 billion in funds.
In a June 27 Bloomberg story, the liquidator alleged that Davies and Zhu racked up the $1.3 billion in debt at a time when 3AC was already bankrupt, increasing losses to creditors. According to reports, 3AC owes creditors $3.5 billion, which would make the founders liable for more than a third of the overall debt.
3AC Liquidators has recently commenced legal proceedings against the founders of the bankrupt hedge fund, seeking a staggering $1.3 billion in compensation. The liquidators allege that the founders bear responsibility for the fund’s collapse and subsequent financial losses suffered by the investors.
This legal action serves as a means to hold the founders accountable for their actions and aims to recover a substantial portion of the investors’ lost assets.
The claim made by 3AC Liquidators is indicative of their belief that the founders’ actions, decisions, or mismanagement contributed significantly to the fund’s downfall.
According to lawyers representing the 3AC liquidators, the co-founder’s potential fine is justified due to his non-compliance with a subpoena for over the past five months. The New York bankruptcy court Judge Martin Glenn had warned that the co-founder, identified as Davies, could be held in contempt of court for refusing to comply with the subpoena.
Allegations have been made against Zhu and Davies, accusing them of allowing Three Arrows, the hedge fund in question, to accumulate significant debt between May and June 2022, following substantial losses on ill-fated Luna coins and other investments.
As the company was already bankrupt, the liquidators have initiated legal action against Zhu and Davies in a British Virgin Islands court, aiming to recover the losses incurred by the firm’s debt.
