Co-founders of the crypto hedge fund three arrows capital (3ac), kyle davies and su zhu, have been issued subpoenas by the courts, along with other members of the leadership team. in july, 3ac filed for chapter 15 bankruptcy protection, claiming to have suffered a $200 million loss when the terrausd (ust) token lost its one-to-one peg with the u.s. dollar and became worthless. bitmex, ftx, and derebit all liquidated 3ac’s positions when ust crashed and rumors of the hedge fund’s significant loss circulated.
Events leading up to the subpoenas took place in the summer, when voyager digital issued 3ac a default notice for an outstanding balance of over $600 million. following the liquidation order, zhu and davies seemed to have disappeared. bankman-fried, the former ceo of ftx, was highly critical of terra after it collapsed and voiced his opinion that 3ac’s own downfall “couldn’t have happened with an on-chain protocol that was transparent”.
Singapore high court granted permission to issue subpoenas to 3ac leadership, including davies and his wife, kelly kaili chen, as well as firms such as defiance capital and its manager, arthur cheong, and starry night capital, the firm’s nft fund and its pseudonymous curator, vincent van dough. it is believed that 3ac had been using leveraged positions, which allowed them to trade with more funds than it had in hand. this is likely the cause of the firm’s downfall, as liquidators seized $35 million worth of 3ac’s assets and are now seeking information on the $30 million “much wow” superyacht. bankman-fried had been vocal about wanting to curb the contagion that threatened to bring down other crypto firms, including voyager digital and blockfi. zhu alleged that bankman-fried had sold and shorted clients’ bitcoin and ethereum deposits for solana and ftx token. davies further alleged that ftx and its sister company, trading desk alameda research, “hunted” 3ac’s trades and challenged the loyalty of the firm’s supporters.