14-12-2023 (SINGAPORE) Three Arrows Capital co-founder Zhu Su has been subjected to questioning in a Singapore court for the first time regarding the collapse of the crypto fund. Liquidators, representing creditors seeking to recover billions of dollars, saw this as their best opportunity to gather information about the fund’s failure.
During the two-day court hearing, Zhu was required to respond to lawyers representing the liquidator, Teneo, who sought details about the fund’s collapse and the location of its assets. The proceedings were private, and the questioning was approved earlier after Zhu’s arrest at Changi Airport on September 29. He was subsequently jailed for four months due to his failure to cooperate with the winding-up process of Three Arrows.
According to sources familiar with the matter, Zhu is expected to be released in December based on standard provisions for good behavior. Dressed in a slim suit and with closely-cut hair, Zhu appeared in the High Court on December 13 and acknowledged the impending questioning when asked by a Bloomberg News reporter. His legal representative did not provide any comment, and requests for comment from the court and the prison service were also unanswered. Teneo declined to comment through its spokesperson.
The collapse of Three Arrows in 2022, as leveraged bets went awry, contributed to a US$2 trillion (S$2.69 trillion) crypto market downturn and a series of collapses in the sector. Liquidators have accused Zhu and the fund’s other co-founder, Kyle Davies, of failing to cooperate fully with their investigation. They are seeking to recover US$1.3 billion from the two individuals, while the overall amount owed to creditors is estimated to be around US$3.3 billion.
The proceedings between Zhu and Teneo’s representatives are part of a civil matter, and neither Zhu nor Davies has faced any criminal charges in Singapore. The information obtained from the court questioning will be shared with the creditors to maximize potential recoveries.
Zhu has previously stated that his and Davies’ attempts to cooperate in good faith with the liquidators were met with resistance. In email correspondence submitted to a New York bankruptcy court by the liquidators, counsel for Zhu and Davies argued that the court orders obtained by the liquidators were baseless.
In mid-September, Singapore’s central bank imposed nine-year prohibition orders on both Zhu and Davies, citing risk management failures and the provision of false information at Three Arrows. The fund, once regarded as one of the largest and most successful crypto hedge funds, shifted its registration to the British Virgin Islands after operating out of Singapore. Teneo was appointed by a British Virgin Islands court in June 2022 to liquidate the fund’s assets.
Zhu and Davies were once considered crypto stars during the pandemic-era bull run, but their reputations were tarnished as the market turned bearish, revealing risky practices. Liquidators are collaborating with authorities worldwide in an effort to locate Kyle Davies, according to a person familiar with the matter in October.
