3AC Co-Founder States That US Court Can No Longer Tell Him What to Do
π Hi, this is Time. Iβm here to tell you about an interesting development in the legal saga of the bankrupt crypto hedge fund Three Arrows Capital (3AC). The co-founder of 3AC, Kyle Davies, has challenged the jurisdiction of the US bankruptcy court hearing his case, claiming that he has renounced his US citizenship and is now a full citizen of Singapore. What does this mean for the creditors and investors who are seeking to recover their funds from Davies and his partner Su Zhu? Letβs find out.
The Background of 3ACβs Collapse
π₯ 3AC was one of the most prominent and successful crypto hedge funds in the industry, managing over $4 billion in assets at its peak. The fund was founded by Davies and Zhu, two former Wall Street traders who became early adopters of Bitcoin and other cryptocurrencies. 3AC was known for its aggressive and risky trading strategies, often using high leverage and derivatives to amplify its returns. The fund also invested in various DeFi projects, NFTs, and other emerging sectors in the crypto space.
π However, things took a turn for the worse in May 2022, when a massive market crash wiped out more than 50% of the crypto market capitalization. 3AC was among the hardest hit by the crash, as it suffered huge losses from its leveraged positions and margin calls. The fund also faced liquidity issues, as many of its investments became illiquid or inaccessible due to network congestion, protocol failures, or hacking incidents. As a result, 3AC was unable to meet its obligations to its creditors and investors, who demanded their money back.
ποΈ In July 2022, 3AC filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York, hoping to restructure its debts and assets. The filing revealed that 3AC owed more than $3.5 billion to its creditors, including banks, exchanges, brokers, lenders, and other funds. The filing also showed that 3AC had only $2.2 billion in assets, most of which were in cryptocurrencies or other illiquid assets. This meant that there was a huge gap between what 3AC owed and what it had.
The Mystery of Davies and Zhuβs Whereabouts
π΅οΈ Since the bankruptcy filing, Davies and Zhu have been elusive and uncooperative with the court and the creditors. Their physical whereabouts have been unknown, as they have not appeared in any public events or interviews. They have also not responded to any emails, phone calls, or messages from the court or the creditors. The only way they have communicated with the outside world is through their Twitter accounts (now renamed as X), where they have occasionally posted cryptic or defiant messages.
π’ In January 2023, the court issued subpoenas to Davies and Zhu, ordering them to provide information and documents related to 3ACβs operations, finances, transactions, and assets. The subpoenas were served through Twitter (now X), as it was the only way to reach them. However, Davies and Zhu ignored the subpoenas, prompting the court to issue orders compelling them to comply or face sanctions. The court also warned them that they could be held in contempt of court if they continued to evade their legal obligations.
The Twist of Daviesβ Citizenship Renunciation
πΈπ¬ On August 1st, 2023, Davies filed a document with the court, claiming that he is no longer a US citizen or resident. He provided notarized and apostilled copies of the form he submitted for the renunciation of his US citizenship on December 15th, 2020. He also claimed that he received Singaporean citizenship in January 2021, after getting married to a Singaporean national in 2017 and obtaining permanent residency status in Singapore. He said that he chose to renounce his US citizenship because Singapore does not allow dual nationality.
π¨ββοΈ Davies argued that since he is not a US citizen or resident anymore, he is not subject to the jurisdiction of the US courts or laws. He said that he has not been validly served with any legal process as a non-party in the case, as he has not been in the US since well before the case commenced. He also said that any orders compelling him to provide information or cooperate with the court should be vacated, as they were based on the incorrect presumption that he is a US citizen.
The Implications of Daviesβ Move for the Case
π€ What does Daviesβ citizenship renunciation mean for the ongoing legal proceedings surrounding 3ACβs bankruptcy? Well, it depends on how the court and the creditors react to his move.
Here are some possible scenarios:
- The court could accept Daviesβ argument and vacate the orders against him, effectively letting him off the hook. This would mean that Davies would not have to provide any information or documents to the court or the creditors, and he would not face any sanctions or penalties for ignoring the subpoenas. However, this would also mean that the creditors would have a harder time recovering their funds from Davies, as they would have to pursue him in Singapore or other jurisdictions where he may have assets or connections.
- The court could reject Daviesβ argument and uphold the orders against him, insisting that he is still subject to the jurisdiction of the US courts and laws. This would mean that Davies would still have to comply with the subpoenas and orders, or face sanctions or penalties for contempt of court. However, this would also mean that the court would have to find a way to enforce its orders against Davies, who is physically outside the US and may have moved or hidden his assets in other countries. The court may have to seek assistance from foreign authorities or courts, which could be a lengthy and complicated process.
- The court could postpone its decision on Daviesβ argument and order him to appear in person at the next hearing to explain his citizenship status and his reasons for renouncing it. This would mean that Davies would have to travel to the US and face the court and the creditors, or risk being held in default or contempt of court. However, this would also mean that Davies would have to expose himself to potential arrest or seizure of his assets by the US authorities or creditors, who may have claims or liens against him.
The Conclusion
π As you can see, Daviesβ citizenship renunciation is a bold and surprising move that could have significant implications for the 3AC bankruptcy case. It could either help him escape the jurisdiction of the US courts and laws, or it could backfire and make his situation worse. It could also create more uncertainty and complexity for the court and the creditors, who are already facing a challenging and unprecedented case involving billions of dollars in crypto assets.
πββοΈ What do you think of Daviesβ move? Do you think he is trying to evade his legal responsibilities, or do you think he has a valid reason for renouncing his US citizenship? Do you think the court will accept or reject his argument? How do you think this will affect the outcome of the 3AC bankruptcy case? Let me know your thoughts in the comments below. Thanks for reading! π
Sources:
- (1) 3AC co-founder rejects jurisdiction of bankruptcy court, claiming he ... |Cointelegraph.
- (2) 3AC co-founder challenges the jurisdiction of the bankruptcy court
- | Cryptopolitan.
- (3) 3AC co-founder can answer subpoena or 'take his chances' β US judge
- | Cointelegraph.
- (4) 3AC co-founder says US court can no longer tell him what to do
- | Headtopics.
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