The liquidators of Three Arrows Capital, a bankrupt crypto hedge fund, are seeking a $1.3 billion recovery claim from the fund’s co-founders, Su Zhu and Kyle Davies. The liquidators, who are partners at Teneo, accuse Zhu and Davies of incurring debt when the firm was already insolvent. The allegations state that the co-founders took on significant leverage between May and June 2022, after the hedge fund suffered heavy losses due to the collapse of LUNA and its stablecoin UST. The liquidators are now trying to recoup the losses, which are part of the $3.3 billion owed to the fund’s creditors. Two platforms with exposure to Three Arrows Capital, BlockFi and Voyager Digital Ltd., have also filed for bankruptcy. The founders have been accused of not cooperating with the liquidation process and allegedly meddling with customer funds. The estate of the collapsed hedge fund has requested a daily fine of $10,000 on Davies for his disregard of previous requests.
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