A judge in the bankruptcy case of Three Arrows Capital (3AC), a defunct crypto hedge fund, has denied a motion to hold co-founder Kyle Davies in contempt of court and impose sanctions. The motion had been filed by the foreign representatives of 3AC in the U.S. bankruptcy case due to Davies’ lack of response to an online subpoena. However, Judge Martin Glenn explained that rulings on motions related to the subpoena were made under the assumption that Davies was a U.S. citizen, unaware that he was a non-U.S. citizen residing outside the country.
In August 2021, Davies provided evidence that he had renounced his U.S. citizenship in December 2020 and gained citizenship in Singapore after marrying a Singaporean national. Singapore does not allow dual nationality. This filing was in response to the contempt motion filed against Davies. Judge Glenn stated that because Davies’ U.S. citizenship was a prerequisite for valid service, he was not properly served with the subpoena, thereby denying the contempt motion.
Although the judge denied the contempt motion, he suggested that the foreign representatives could consider seeking compliance through Singaporean courts as the U.S. court may not have jurisdiction over Davies. However, Davies’ co-founder, Su Zhu, who also received a summons, is a Singaporean national residing outside the United States and is not subject to the subpoena.
The liquidators handling the bankruptcy case of 3AC are attempting to recover approximately $1.3 billion in funds from Davies and Zhu, as the firm allegedly owes creditors $3.5 billion. The whereabouts of both co-founders have largely been unknown since the collapse of 3AC in July 2022, but Davies’ lawyers disclosed his residence in Singapore in the filings.
It is worth noting that in April, Davies and Zhu played a role in launching Open Exchange, a platform designed for trading claims against bankrupt crypto companies. This venture aimed to provide an avenue for users to engage in claim trading.
In summary, the judge in the bankruptcy case of Three Arrows Capital has denied a contempt motion against co-founder Kyle Davies, citing a lack of proper service due to his non-U.S. citizenship. The court suggested seeking compliance through Singaporean courts instead. The liquidators are still pursuing recovery of funds from both Davies and his co-founder, Su Zhu, who is not subject to the contempt motion due to his residency outside the United States.
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