Legal team for 3AC liquidators blast founders for shifting blame to FTX, media blitz amid bankruptcy

In a bankruptcy court hearing, lawyers for 3AC creditors asserted the firm’s founders “repeatedly fail to engage” with liquidators, but weren’t shy about talking to the media.

The founders of Three Arrows Capital, or 3AC, the Singapore-based crypto hedge fund with close ties to Terra Labs, have been spending more time engaging on social media and news outlets than dealing with its own liquidation, according to bankruptcy lawyers.

In a Dec. 2 hearing in United States Bankruptcy Court in the Southern District of New York, lawyers for 3AC’s liquidators cited founders Zhu Su and Kylie Davies for being “active and responsive to comments via Twitter” but “repeatedly fail[ing] to engage” with liquidators to discuss the company’s assets and related issues. According to the legal team, Zhu and Davies have only had “limited discussions” with liquidators in addition to changing jurisdictions often — reportedly traveling to Bali and the United Arab Emirates.

Adam Goldberg, a lawyer with Latham and Watkins representing 3AC liquidators through advisory firm Teneo, added the founders had spoken to reporters with CNBC and Bloomberg “in an apparent effort to rehabilitate their reputations” and took advantage of another major crypto firm going belly up:

“Since the collapse of FTX, Mr. Davies has appeared on CNBC and both of the founders have been very active on Twitter, calling out FTX and advancing the theory that FTX caused the debtors’ collapse. It’s interesting, to say the least, that the first time we’ve heard this theory that FTX caused the downfall of this debtor was after FTX’s own sensational collapse.”

Goldberg pointed to “ironic” behavior from both Zhu and Davies, who have tweeted calls to former FTX CEO Sam Bankman-Fried to “reveal the truth” while seemingly sidestepping responsibility for 3AC creditors. He hinted at methods seeking to compel both the 3AC founders into complying with court proceedings, likely an extension of proposing an “alternative means” to subpoena Zhu and Davies in October. At the time of publication, it was unclear where the 3AC founders were located.

3AC filed for a Chapter 15 bankruptcy on Jul. 1 in New York bankruptcy court. The firm at one point managed more than $10 billion worth of assets, and its liquidation has likely contributed to the ongoing crypto bear market. In the wake of its collapse, crypto lending firms including Voyager Digital, Celsius Network, BlockFi, and FTX have all reported liquidity issues eventually leading to bankruptcy filings.