In February, allegations emerged that Kyle Davies, co-founder of Three Arrows Capital (3AC), was evading subpoenas related to the collapse of a defunct Singapore cryptocurrency hedge fund. The current custodians of the 3AC estate are now seeking a daily fine of $10,000 against Davies for his non-compliance with the inquiries from the New York court.
Contempt of Court: Co-Founder Faces Consequences
In July of the previous year, the crypto hedge fund 3AC, which is no longer operational, filed for Chapter 15 bankruptcy protection. The fund suffered significant losses due to the collapse of the Terra blockchain ecosystem, along with substantial losses from its holdings in the Grayscale Bitcoin Trust (GBTC).
Prior to the bankruptcy filing, reports indicated the possibility of insolvency for the company following liquidations that resulted in multimillion-dollar losses. During the bankruptcy proceedings and liquidations, it was alleged that co-founder Kyle Davies failed to comply with court-issued subpoenas.
The liquidation team and estate managers attempted to serve subpoenas to both Davies and co-founder Su Zhu through Twitter. At the time, the liquidators expressed their disappointment, stating that “[Davies] is undoubtedly aware of the subpoena… as he was tagged in 41 replies and 64 retweets… yet he has chosen to ignore his obligations to Three Arrows.”
According to a report by Jack Schickler of Coindesk on June 15, the estate of the hedge fund filed documents asserting that Davies should be held in contempt of court for his lack of response. The report further mentioned that the estate proposed a daily fine of $10,000 as a penalty for disregarding the court’s requests.
The court filing explicitly states, “Davies’s failure to respond is not due to an inability to engage with the court or any legitimate concerns regarding its jurisdiction. It is unequivocal that the court has the authority to hold Davies in willful contempt and impose sanctions.” Schickler’s report also reveals that a hearing to address the contempt request has been scheduled for August 8, 2023.
We would like to hear your thoughts on the 3AC estate’s pursuit of sanctions against Davies for his alleged failure to comply with court-ordered subpoenas. Please share your opinions on this matter in the comments section below.