The High Court of Singapore has rejected the application made by bankrupt crypto hedge fund Three Arrows Capital (3AC) to dismiss the lawsuit filed by Cheong Jun Yoong, the founder of Web3 investment firm DeFiance Capital. DeFiance Capital argued that its assets and operations were separate from those of 3AC and should not be part of the liquidation process.
Cheong filed the lawsuit in April 2023, claiming that DeFiance Capital Investors were the ultimate beneficiaries of assets held in trust by 3AC. He argued that the trust funds could not be used to satisfy creditor claims against 3AC. The lawsuit stated that Cheong had agreed with the founders of 3AC to establish an independent fund on the 3AC platform, with control over the fund and access to 3AC’s infrastructure.
The fund, known as DeFiance Capital, had segregated accounts in Cheong’s name and held significant amounts of cryptocurrency and fiat currencies. When 3AC declared bankruptcy in July 2022, the Singapore High Court allowed DeFiance Capital to sue the 3AC estate to recover assets. 3AC filed a counterclaim on the same day. The court recognized the presence of a trust, despite 3AC’s objections.
This acknowledgment by the court is seen as a positive sign for DeFiance Capital. The judge’s decision is considered a vindication for Cheong, according to a former restructuring attorney known as WassieLawyer. 3AC argued that it and DeFiance Capital were a single entity, but DeFiance Capital had only used 3AC’s legal structure for a fee and had not commingled its operations with 3AC.
Overall, the court’s rejection of 3AC’s application and recognition of the trust is a positive development for DeFiance Capital in its pursuit of recovering assets from the bankrupt crypto hedge fund.
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