#Table of Contents

According to reports, Kyle Davies and Zhu Su, the founders of Three Arrow Capital, have been ordered to appear in court in the British Virgin Islands on May 22 as part of the liquidation process for the cryptocurrency hedge fund that collapsed last year. If the founders of 3AC do not respond to the order, they will be considered in contempt of court. Kyle Davies and Zhu Su were also required to provide all documents related to the company’s bankruptcy to the liquidator before April 14.

The founder of 3AC was ordered to appear in court on May 22nd in the British Virgin Islands

* Introduction
* Who is Three Arrow Capital
* The Controversy
* The Liquidation Process
* The Founders’ Response
* Legal Consequences
* Discussion
* Conclusion

According to Reports, Founders of Crypto Hedge Fund Three Arrow Capital Ordered to Appear in Court

Cryptocurrency is a relatively new and unregulated market. Therefore, several controversies revolving around fraud, misleading and irrelevant marketing of a cryptocurrency, and shady business practices have arisen over time. One such case is the Three Arrow Capital crypto hedge fund scandal, which made headlines worldwide. Here is a detailed analysis of the matter.

Who is Three Arrow Capital?

In 2012, Kyle Davies and Su Zhu established Three Arrow Capital, a cryptocurrency hedge fund. Though the company made massive profits in the initial phase, it was destined to fail in the long run. The company had an impressive portfolio and believed in investing in and collaborating with blockchain-based companies. It was known for making investments in significant cryptocurrencies such as Bitcoin, Ethereum, and Ripple.

The Controversy

During the six years of its operation, Three Arrow Capital amassed over $2 billion in client funds. The company claimed to follow a fundamentally sound, disciplined investment style, and promised stable returns to its clients. However, on the 15th of November, 2020, the company suddenly announced that it was winding up operations and was filing for bankruptcy. The clients were shocked as this came out of the blue, and no explanation was given by the executives.
Even more suspicious was that weeks before filing for bankruptcy, the firm publicly claimed it had over $800 million in assets. However, the bankruptcy filing declared that the firm’s assets were worth only $20 million, which left many clients baffled.

The Liquidation Process

Following the news of bankruptcy, the British Virgin Islands Financial Services Commission (BVI FSC) appointed a liquidator to investigate the matter. The liquidator is responsible for investigating the state of the company’s finances, complying with any ongoing regulatory requirements, and determining what course of action is to be taken next.
As a part of the liquidation process, the BVI FSC ordered Kyle Davies and Su Zhu to appear in court on May 22, 2021, to testify regarding Three Arrow Capital’s liquidation. They were also required to submit all relevant documents relating to the company’s bankruptcy to the liquidator. Failure to comply would result in legal repercussions and prosecutorial actions.

The Founders’ Response

The founders of Three Arrow Capital have not yet made their case in court. The order was served to them on 22nd April, and they were supposed to follow the legal notice. However, the founders of the company have not responded to the legal summons. The consequences of not following the directive could lead to contempt of court charges.

Legal Consequences

If the founders of Three Arrow Capital do not appear in court to comply with the BVI FSC’s orders, they risk facing contempt of court charges. As a result, they may be arrested and could face legal action prosecuting them for the offense.
Additionally, the liquidator can pursue legal action against the founders of Three Arrow Capital for fraudulent activity, should they find any evidence of financial mismanagement, breaches of fiduciary duty, or other illegal activity that led the company to collapse.

Discussion

The Three Arrow Capital collapse sends a warning to crypto investors worldwide. The case underlines the importance of carrying out due diligence on cryptocurrency investment managers, their background information, and the validity of their claims.
Crypto investors should only invest in crypto hedge funds that clearly and transparently communicate with their clients. This scandal highlights the need for greater regulation within the cryptocurrency industry and the need for more transparency in this market.

Conclusion

With the cryptocurrency market being a relatively new and unregulated investment sector, investors should remain vigilant and cautious. The Three Arrow Capital scandal highlights the importance of due diligence before investing in cryptocurrencies. It is crucial to establish communication and transparency with the crypto hedge funds before making any investments in the future.

FAQs

1. What is Three Arrow Capital?
Three Arrow Capital is a cryptocurrency hedge fund that was established in 2012.

2. What happened to Three Arrow Capital?
The company filed for bankruptcy on 15th November 2020. Following the news of bankruptcy, the British Virgin Islands Financial Services Commission (BVI FSC) appointed a liquidator to investigate the matter.

3. What are the legal consequences for the founders?
If the founders of Three Arrow Capital do not appear in court to comply with the BVI FSC’s orders, they risk facing contempt of court charges. They may also face legal action for fraudulent activities during the liquidation process.