- U.S. Judge Martin Glenn orders 3AC co-founder Kyle Davies to submit financial documents related to the company’s bankruptcy proceedings by April 13 or be held in contempt.
- Davies and Su Zhu launched a new company, Open Exchange (OPNX), amid ongoing legal issues, raising concerns about the venture’s transparency.
- The outcome of the Davies case may set a precedent for future cases involving crypto-related financial crimes and influence future regulatory actions.
The ongoing bankruptcy proceedings of Three Arrows Capital (3AC), a Singapore-based crypto hedge fund, have taken a new turn as co-founder Kyle Davies is again ordered to submit financial documents related to the company. The case highlights the risks associated with the largely unregulated crypto industry and the need for greater oversight and transparency.
U.S. Judge Gives Kyle Davies a New Deadline
U.S. Judge Martin Glenn has signed a second order, giving Kyle Davies 14 days to turn over financial records related to 3AC’s bankruptcy proceedings or be held in contempt. With the new deadline set for April 13, Davies faces increasing pressure to cooperate with liquidators. This is not the first time the liquidators have accused Davies of “withholding information”; a similar motion was filed in February, alleging that Davies had been “shamelessly” raising millions to launch a new company.
3AC, also known as Three Arrows Capital, was ordered to liquidate in June after enduring severe losses following the collapse of the TerraUSD algorithmic stablecoin in May. With around $200 million lost on its TerraUSD position, the firm faced further pressure as creditors demanded more collateral to secure borrowed funds. Voyager Digital, another company now undergoing bankruptcy proceedings, issued a default notice for more than $600 million, which dealt the final blow to 3AC.
Founders’ New Venture and Legal Complications
Despite the ongoing legal issues, Davies and co-founder Su Zhu launched a new company, Open Exchange (OPNX), which allows users to trade bankruptcy claims. However, Davies’ refusal to cooperate with the liquidators has raised concerns about the transparency of this new venture.
Davies was initially served a subpoena over Twitter on January 5 after conventional means of service proved unsuccessful. Judge Glenn noted that the liquidators had not provided enough evidence to establish U.S. jurisdiction for Zhu. However, he stated that Davies’ social media presence indicates that he is well aware of the subpoena, given the significant number of replies and retweets following the tweet’s service.
Implications for the Crypto Industry
The 3AC case underscores the need for more stringent regulations and transparency in the rapidly growing crypto industry. Although the potential for innovation and investment opportunities is vast, the lack of oversight has led to numerous instances of fraud, theft, and market manipulation.
As crypto gains mainstream acceptance, regulators worldwide are working to establish guidelines that protect investors and prevent financial crime. In the U.S., the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have taken action against several companies and are working to regulate the crypto space. Similarly, in Europe, the European Securities and Markets Authority (ESMA) and individual countries like Germany and France have introduced their regulations.
The judge’s order for Davies to turn over financial documents represents a step toward holding those in the crypto industry accountable for their actions. The outcome of this case will likely have far-reaching implications for the industry and may set a precedent for future cases involving crypto-related financial crimes.
