By Dietrich Knauth and Jaiveer Shekhawat
(Reuters) – Liquidators at bankrupt cryptocurrency hedge fund Three Arrows Capital (3AC) are seeking to recover $1.3 billion from the co-founders, a person familiar with the matter told Reuters on Tuesday, an amount that reflects losses they allegedly racked up before the firm collapsed last year.
The liquidators discussed the allegations against Three Arrows co-founders Su Zhu and Kyle Davies at a Tuesday meeting with the hedge fund’s creditors, the person said.
Zhu and Davies are accused of causing Three Arrows to take on significant leverage between May and June 2022 after the hedge fund suffered big losses on Luna tokens and other investments, the person said.
The firm was already insolvent, liquidators contend, and they are now taking action against Zhu and Davies in a British Virgin Islands court to recover those losses for the creditors, the person added.
Representatives for Zhu and Davies could not be reached for comment immediately.
Bloomberg News first reported the development.
Three Arrows was the first major crypto firm to go bankrupt in 2022, brought down by the collapse of cryptocurrencies Luna and TerraUSD in May. It filed for bankruptcy in the British Virgin Islands in late June.
The liquidators were appointed by that court to wind down the company and pay its debt. They filed a parallel bankruptcy case in Manhattan to shield Three Arrows’ U.S. assets.
Earlier this month, a set of non-fungible tokens previously bought by Three Arrows was sold for $10.9 million at Sotheby’s in New York.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru and Dietrich Knauth in New York; Editing by Sriraj Kalluvila)
