Three Arrows’ Su Zhu Breaks Silence Accusing Liquidators of Playing Dirty

Su Zhu, the co-founder of Three Arrows Capital, has accused the hedge fund’s liquidators of operating in bad faith, breaking a month-long silence during which his firm suffered a stunning fall from grace.

“Sadly, our good faith to cooperate with the Liquidators was met with baiting,” Zhu wrote. The tweet included screenshots of a pair of emails his attorney had sent liquidator Russell Crumpler of Teneo.

The last time Zhu tweeted or otherwise posted any public comments was on June 14, as rumors swirled that his $10B fund was insolvent. At the time, Su tweeted cryptically, “We are in the process of communicating with relevant parties and fully committed to working this out.” Who those parties were and what “this” was were left unsaid. But it didn’t take much time for people to figure it out.

Ghosting Creditors

Since that tweet, Three Arrows has defaulted on a $700M loan, been ordered by a court to liquidate and filed for Chapter 15 bankruptcy. All the while, Zhu and co-founder Kyle Davies have gone dark, ignoring media inquiries and allegedly ghosting creditors and even the court-appointed liquidators, who have taken control of the fund.

The liquidators aired their frustrations in a court document filed Friday.

An “introductory Zoom call” was arranged with Zhu and Davies, according to the document. People “identifying themselves as ‘Su Zhu’ and ‘Kyle’ were present on the Zoom call,” but “their video was turned off and they were on mute at all times with neither of them speaking despite questions being posed to them directly.”

Teneo lawyers said the co-founders’ whereabouts are unknown and that a Three Arrows office in Singapore was locked and empty during a visit in late June. The lawyers also warned of an “actual and imminent risk that [Three Arrows’] assets may be transferred or otherwise disposed of by parties other than [Teneo] to the detriment of the Debtor, its creditors, and all other interested parties.”

In the emails Zhu posted on Twitter Tuesday, Christopher Anand Daniel, of Singapore-based Advocatus Law LLP, said Su and Davies were doing their best, given the circumstances: the pair have “received threats of physical violence” and have been racing to answer questions from Singapore’s central bank, which announced last month that it was investigating Three Arrows “in light of recent developments which call into question the solvency of the fund.”

In a separate email, Daniel took issue with the liquidators’ stewardship of the company.

StarkWare Warrants

Three Arrows had a claim on tokens to be issued by crypto firm StarkWare. Daniel alleged Teneo did not claim the tokens before a July 5 deadline, causing “the Company to lose substantial value.”

Teneo and Daniel did not immediately respond to a request for comment.

Observers were left to speculate as to why Teneo might have declined or failed to claim the tokens.

“A tradfi liquidator could reasonably believe that their goal is to recover what they have and not focus on getting tokens in a start-up, but seems weird not to exercise the warrant assuming strike price (actual cost to 3AC) is de minimis?” wrote BuckyCantor, a self-described crypto lawyer.

Another observer offered a theory in response.

“I suspect this is because Liquidators aren’t crypto native and are reluctant to throw real USD after tokens which may not be saleable,” wrote Twitter user WassieLawyer. “Their mandate is to liquidate; not to keep running 3AC as a business.”