2026-07-31 · Illicit Finance
not say where they are
A British Virgin Islands court wound up the fund on 27 June 2022. The liquidators’ own US bankruptcy filing, four days later, recorded that they did not know what country either founder was in.
Case file
| Field | Value |
|---|---|
| Matter | Three Arrows Capital, Ltd (in liquidation) |
| Court | Eastern Caribbean Supreme Court, High Court of Justice (Virgin Islands), Commercial Division |
| Claim number | BVIHC(COM) 2022/0119 |
| Liquidation date | 27 June 2022. Order appointing the joint liquidators entered 29 June 2022 |
| Applicants | Petitions presented by the company’s own directors and by certain creditors |
| Joint liquidators | Russell Crumpler and Christopher Farmer, Teneo (BVI) Limited |
| Directors at collapse | Kyle Davies, Su Zhu, Mark James Dubois |
| Reported AUM | Over US$3 billion as at April 2022 (Chapter 15 petition); in excess of US$9 billion during 2021 (Ogier) |
| Creditor claims received | In excess of US$3 billion. Admitted total not established |
| Estimated creditor recovery | Approximately 35.16% of admitted unsecured claims, per the liquidators, 24 March 2026 |
| US recognition | Chapter 15, Bankr. S.D.N.Y., No. 22-10920 (MG), Chief Judge Martin Glenn. Filed 1 July 2022, recognised as a foreign main proceeding 28 July 2022 |
| Singapore recognition | HC/OA 317/2022, General Division of the High Court, allowed 22 August 2022 |
| Related fund | Three Arrows Fund Ltd (TAFL), BVI, in liquidation from January 2023. Chapter 15 No. 24-10210 (MG), recognised 11 March 2024 |
| Founders | Su Zhu and Kyle Livingston Davies. Nine-year MAS prohibition orders effective 13 September 2023; four-month Singapore committal sentences ordered 25 September 2023 |
| Posture as of 31 July 2026 | In liquidation. Last liquidators’ notice read: 1 June 2026. Last S.D.N.Y. docket entry read: 24 March 2026. BVI trial of the liquidators’ claims against the founders listed in two parts, April 2026 and November 2026; the outcome of the April 2026 hearing is not established |
| Agencies and courts | BVI Commercial Court, Bankr. S.D.N.Y., Singapore High Court and Court of Appeal, Monetary Authority of Singapore |
What the record shows
Three Arrows Capital, Ltd was an investment firm founded in 2012 and incorporated in the British Virgin Islands, trading cryptocurrency and other digital assets, with operations in Singapore and elsewhere. It had three directors: Kyle Davies, Su Zhu, and Mark James Dubois, a BVI resident.
The reported size of the fund differs by source and by date, and the two figures in circulation are not measuring the same moment. The joint liquidators’ Chapter 15 petition records that the fund was “reported to have over $3 billion of assets under management as of April 2022”. Ogier, which acted for the liquidators, gives reported assets under management in excess of US$9 billion during 2021. In March 2026 the liquidators told the US bankruptcy court that the fund lost approximately US$2.5 billion in net asset value and failed in early 2022, in part because of the global cryptocurrency market decline [P]. On 9 August 2024 the liquidators filed proofs of claim in the Terraform Labs Chapter 11 proceedings, including claims for invested capital and damages arising from alleged misrepresentations; those claims remain pending.
On 27 June 2022 the fund was placed into liquidation by the Eastern Caribbean Supreme Court in the High Court of Justice (Virgin Islands), Commercial Division, in claim BVIHC(COM) 2022/0119. The liquidators’ March 2026 status report records that this followed “petitions presented by 3AC’s directors and certain of its creditors”. The Chapter 15 petition filed four days later describes the same sequence from the company’s side: in response to financial pressures, creditor demands, and the filing of petitions by creditors for liquidation in the BVI Court, “the Debtor filed the BVI Proceeding on June 27, 2022”. That petition also records that on 29 June 2022 the BVI Court entered an order appointing the joint liquidators. Russell Crumpler and Christopher Farmer of Teneo (BVI) Limited took the appointment and gave statutory notice on 30 June 2022, which states a date of liquidation of 27 June 2022 and convened a first creditors’ meeting for 18 July 2022 under s 179 of the Insolvency Act 2003.
The US proceeding
On 1 July 2022 the joint liquidators, as foreign representatives, filed a Chapter 15 petition in the United States Bankruptcy Court for the Southern District of New York, case number 22-10920, before Chief Judge Martin Glenn. The verified petition records, at paragraph 7, that “while the Debtor has had certain operations in Singapore, Mr. Davies and Mr. Zhu’s current location remains unknown. They are rumored to have left Singapore”. The court recognised the BVI liquidation as a foreign main proceeding on 28 July 2022 [P].
On 6 December 2022 the bankruptcy court entered an order authorising the foreign representatives to serve subpoenas for the production of documents and testimony on the founders, the investment managers, and any other person the representatives reasonably determined might hold relevant information, and directing the founders to turn over recorded information relating to the company’s property or financial affairs. The relief was granted under 11 U.S.C. §§ 524(e), 1521(a)(4) and 1521(a)(7) and Bankruptcy Rule 2004.
Service of those subpoenas was dealt with in a separate ruling. In a published opinion of 29 December 2022, reported at 647 B.R. 440, Chief Judge Glenn granted the foreign representatives’ motion for alternative service by email and Twitter as to Kyle Davies and denied it as to every other party. The opinion records the foreign representatives’ account that they could not serve the founders because their whereabouts were unknown, that a Singapore law firm which had previously acted for them declined to accept service, and that the Hague Convention route was unavailable because Davies’s location was unknown.
The court granted a motion compelling Davies to comply with the subpoena on 22 March 2023, but on 11 August 2023 it denied the foreign representatives’ motion to hold him in civil contempt and to impose sanctions, and denied his cross-motion to vacate. The order states: “At no point has this Court purported to exercise jurisdiction over Mr. Davies”.
The Singapore proceedings
On 9 July 2022 the liquidators applied in Singapore, in HC/OA 317/2022, for recognition of the BVI liquidation as a foreign main proceeding under Article 2(f) of the UNCITRAL Model Law as adopted by the Third Schedule to the Insolvency, Restructuring and Dissolution Act 2018. A judge of the General Division of the High Court allowed the application on 22 August 2022.
On 30 November 2022 the same judge made a disclosure order. The liquidators had asked only for relief against Three Arrows Capital Pte Ltd, the Singapore entity. The judge went further and ordered, on his own motion, that Zhu and Davies each personally file an affidavit accounting for his own and the Singapore entity’s dealings with the BVI fund and exhibit all documents in his possession or control. Neither man complied. The liquidators obtained permission to apply for committal on 30 June 2023 and filed the committal applications on 13 July 2023.
On 25 September 2023 the judge made the committal orders and sentenced both Zhu and Davies to four months’ imprisonment for contempt of court, for intentionally disobeying or breaching the disclosure order. Zhu was arrested at Changi Airport and committed to prison on 29 September 2023. Davies has remained outside Singapore. Zhu was examined by an Assistant Registrar on 12 and 13 December 2023.
Both men later applied to set aside the disclosure order, the permission orders and the committal orders. Those applications were dismissed on 27 November 2023, and the appeals against that dismissal were themselves dismissed by the Court of Appeal on 24 June 2025 in Zhu Su v Three Arrows Capital Ltd [2025] SGCA 31, before Sundaresh Menon CJ, Belinda Ang Saw Ean JCA and Kannan Ramesh JAD. The same judgment allowed Zhu’s separate appeal in part and set aside the order for his further examination, on the ground that the liquidators had already formed an intention to sue him in the BVI when they sought it and had not disclosed that fact. The court restrained the liquidators from relying in the BVI proceedings on information obtained from the examination.
In March 2026 the liquidators told the US court that Zhu “has already served a related custodial sentence in Singapore” and that Davies “remains subject to committal orders in Singapore for failure to serve a custodial (prison) sentence”.
The regulator
The Monetary Authority of Singapore acted against the Singapore fund manager, Three Arrows Capital Pte Ltd, and separately against the two men. The manager and the fund in liquidation are different companies, and the MAS actions attach to the manager.
On 30 June 2022 MAS reprimanded Three Arrows Capital Pte Ltd for three contraventions: failing to ensure that information given to MAS was not false or misleading, contrary to s 329(1) of the Securities and Futures Act 2001; failing to notify MAS of changes to the directorships and shareholdings of Zhu and Davies within the required period, contrary to paragraph 5(7I)(a) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations; and exceeding the S$250 million assets-under-management ceiling for a registered fund management company between July and September 2020 and again between November 2020 and August 2021, contrary to paragraph 5(7F) of that Second Schedule [P]. The false-information finding concerned the manager’s representation that it had novated management of its only fund to an unrelated offshore entity with effect from 1 September 2021, when the two shared a common shareholder in Su Zhu.
On 14 September 2023 MAS issued nine-year prohibition orders against Zhu Su and Kyle Livingston Davies for contraventions of the Securities and Futures Act 2001 and the Securities and Futures (Licensing and Conduct of Business) Regulations. The orders took effect on 13 September 2023 and bar each man from performing any regulated activity and from taking part in the management of, acting as a director of, or becoming a substantial shareholder of any capital market services firm under the Act. MAS found further contraventions by the manager between August 2020 and January 2022: failing to notify MAS of the employment of a portfolio manager, falsely representing in January 2022 that no notification had been required, and having no risk management framework for the cryptocurrency and digital-asset investments under its management. Zhu was the manager’s chief executive and a director, Davies its chairman and a director, and MAS concluded that both had failed to discharge their duties and were responsible for the manager’s breaches [P].
What the liquidators are pursuing
On 18 December 2023 the liquidators commenced proceedings against Zhu and Davies in the BVI, seeking among other things about US$66 million said to be owed by Zhu, and obtained a worldwide freezing injunction. As at March 2026 they had filed an insolvent trading claim of approximately US$1.1 billion against both men, and were pursuing about US$66 million from Zhu and about US$4.6 million from Kelly Chen, Davies’s former spouse. Worldwide and domestic freezing orders against the founders remain in effect; the liquidators consider the founders’ asset disclosures to the BVI Court inadequate, have identified repeated breaches of the freezing orders, and have brought contempt proceedings [P]. Trial has been listed in two parts, the first before the BVI Court in April 2026 and the second in November 2026.
Claims and distributions
The liquidators have received creditor claims in excess of US$3 billion. The admitted total has not been established from a primary document, and the two figures are not interchangeable: a claim received is a claim asserted, a claim admitted is one the liquidators have adjudicated and accepted for distribution.
The primaries give the ratio. In their March 2026 status report the liquidators estimated that creditors are ultimately expected to recover approximately 35.16% of admitted unsecured claims, subject to market volatility and the outcome of ongoing litigation. Total anticipated recoveries, including realised, distributed and expected future proceeds, were approximately US$1.18 billion as at 16 March 2026, with an estimated US$382 million of assets then held in the estate. Six interim distributions totalling US$450 million had been declared, of which US$422.5 million had been paid after claim adjustments.
The individual distributions are on the public record. The BVI Court sanctioned the first interim distribution of up to US$100 million on 28 March 2024, following a claims bar date of 14 March 2024; a second of up to US$100 million on 26 June 2024; and a third on 10 October 2024, declared at US$75 million. The liquidators gave notice of a seventh interim dividend on 4 March 2026 and of an eighth on 1 June 2026, the latter to be distributed on or after 10 July 2026.
Three Arrows Fund Ltd, which had to sue the fund it invested in
Three Arrows Fund Ltd (TAFL), a separate BVI vehicle, was placed into liquidation in January 2023 with its own liquidators.
What followed is the clearest illustration on this desk of what a fund interest actually is. On 8 February 2024 TAFL’s liquidators filed their own Chapter 15 petition in the Southern District of New York, case number 24-10210, again before Chief Judge Glenn. The 3AC liquidators objected to recognition on 29 February 2024. TAFL was granted Chapter 15 recognition on 11 March 2024. On 14 March 2024 the TAFL liquidators filed a substantial claim in 3AC’s liquidation, pleaded in the alternative to any proprietary claim.
That claim has since been rejected. As at March 2026 the TAFL claim was asserted in 3AC’s liquidation for a maximum value of approximately US$121 million, on the basis of an alleged unauthorised over-issuance of shares in 3AC. The 3AC liquidators rejected it, and TAFL’s liquidators are challenging the rejection before the BVI Court.
The share register is itself in dispute, and the two available accounts do not agree. The 3AC liquidators’ own public notices describe TAFL as “the majority shareholder of the Company”. The Singapore Court of Appeal, reciting the facts in June 2025, records that Three Arrows Capital Pte Ltd, the Singapore entity, “owned 100% of the shares” in the BVI fund. The over-issuance claim TAFL is running is a dispute about which of those is right, and it has not been resolved.
So a fund holding investors’ money had to obtain recognition in a second country, file a claim in the master fund’s insolvency to reach assets its own investors had ultimately funded, have that claim rejected, and then litigate the rejection.
The Deribit stake
The liquidators reported in March 2026 that 3AC indirectly owned approximately 15 per cent of the derivatives exchange Deribit through a special purpose vehicle. Coinbase acquired Deribit on 14 August 2025 in a cash and stock transaction, and the liquidators estimated a net recovery to the estate of approximately US$350 million, subject to administrative steps within the SPV structure, transaction costs and tax holdbacks. The same report sets out the rest of the estate: the BVI Court declared on 18 November 2025 that the assets known as the DeFiance portfolio belong to 3AC, and approximately US$117.6 million of those had been transferred to the estate; non-fungible token realisations stood at approximately US$23.6 million; and cash and cash equivalents under the liquidators’ control were US$72.7 million as at 16 March 2026.
The distribution application
On 28 March 2024 Webster J (Ag) sanctioned an interim distribution of up to US$100 million in claim BVIHC(COM) 2022/0119. The application was made under s 186(5) of the Insolvency Act 2003 as a Category 2 application, meaning the liquidators had the power to act and were seeking the court’s approval of a significant decision rather than surrendering the decision to the court. The judge was satisfied that, even after the distribution, the liquidators had made adequate provision under r 191(1) of the Insolvency Rules 2005 for undetermined and disputed claims, including TAFL’s. The 3AC liquidators were represented by Nicholas Brookes and Romauld Johnson of Ogier, David Chivers KC and Jack Rivett of Erskine Chambers, and Daniel Kessler of 4 Stone Buildings.
What I think happened
Plenty of funds blew up in mid-2022, so the trading is the least interesting part of this one. The part that holds up is procedural. A fund with billions in creditor claims was wound up by a court that then had to go to a second court on another continent to obtain records, and still could not establish where the two people who ran it were living. The liquidators wrote that down in a sworn filing four days into the case. The first time either founder answered questions under compulsion was seventeen months later, in a Singapore courtroom, after an arrest.
That follows from how the vehicle was assembled. The fund was incorporated in the BVI and operated from Singapore, with assets spread across exchanges in several other jurisdictions and counterparties in more. Each of those boundaries is a place where a liquidator needs separate legal authority. Chapter 15 exists precisely because that problem is common, and it did real work here, but look at what it could not do. Judge Glenn authorised the subpoenas. He allowed service by email and Twitter on one founder and refused it as to everyone else. He compelled compliance. And then he denied the contempt motion and wrote that he had never purported to exercise jurisdiction over Davies at all. What eventually produced disclosure was a Singapore judge adding the founders to a disclosure order on his own motion, and an arrest at an airport.
I had the Deribit story wrong in the first version of this piece. The error is a common one, which is why I am spelling it out here instead of editing it away. Deribit’s operator is widely reported as the creditor that forced the fund under, and I repeated that. What the liquidators filed is that the liquidation followed petitions presented by the company’s own directors and by certain creditors, and that the company itself filed the application on 27 June. OffshoreAlert lists a BVI liquidation order captioned DRB Panama Inc. v. Three Arrows Capital Ltd., which supports the reported account, but that document is behind a paywall and I have not read it. So the honest position is that creditor petitions were on file, the directors filed too, and which one carried the day is a question I cannot answer from the record I have. If you are an investor in a fund and you learn about its condition from a liquidation application, you are at the back of an information queue that has already been moving for weeks. That point survives. The name attached to it does not.
The more useful Deribit fact turns out to be the other one. 3AC held about 15 per cent of Deribit through an SPV, and Coinbase’s purchase of Deribit in August 2025 is now the single largest expected recovery in the estate, at roughly US$350 million against total anticipated recoveries of US$1.18 billion. The venture position on the side of the book is doing more for creditors than the trading book ever did.
On the founders: the four months was for contempt of court. Nothing in it touches the trading. Both men got the same sentence, and only one of them was in the country to serve it. Recovering assets from someone who does not want to be found is largely a civil process conducted by an insolvency practitioner with a budget, and the budget comes out of the pool that would otherwise be distributed. Four years on, the liquidators are still telling a court that the founders’ asset disclosures are inadequate and that the freezing orders have been breached repeatedly.
What would have changed the outcome
The lesson here is about the difference between investing in a fund and holding assets directly, which most people treat as a difference in strategy when it is mostly a difference in what you legally hold.
When you invest in a fund, you own an interest in the fund. You do not own the underlying assets. If the fund fails, you are a claimant in its insolvency, and the process, the timetable, and your priority are set by the law of the place it was incorporated.
The TAFL sequence above is what that sentence means in practice, and it is worth following the chain. Money went into a fund. That fund held an interest in another fund. The second fund held the assets, some of them in the United States. When both failed, the investors did not have a claim on the assets. They had a claim on the first fund. That fund then had to be wound up in the BVI, obtain Chapter 15 recognition in the United States more than a year later, over the objection of the other fund’s liquidators, and file a claim in the second fund’s liquidation, in the alternative to a proprietary claim it might not win. The claim was rejected. Two years after that, its liquidators are litigating the rejection, and the underlying question of who actually held the shares is still open. Every one of those steps costs money that comes out of the pool, and every one of them takes time measured in quarters.
None of that means anybody did anything wrong. That is what a stacked fund structure does when it fails.
None of that is a reason to avoid funds. It is a reason to know, before subscribing:
- Where is the vehicle incorporated, and what does insolvency look like there? BVI, Cayman and Delaware behave differently, and the differences matter in a wind-down.
- Who is the administrator and who audits it? An independent administrator producing the NAV is a different thing from the manager producing it.
- Where do the assets actually sit, and with which custodian or prime broker?
- What are the redemption terms, including gates and suspensions, which is the clause that decides whether you can leave before the counterparties do.
- Who is registered as holding the shares, and does the register agree with the offering documents? The TAFL dispute is a fight about exactly that, four years after the fact.
For assets you want to hold rather than allocate, direct ownership with a third-party qualified custodian keeps them out of any fund’s estate, because they were never in it. DAG works with holders on how positions are held across direct and managed structures, including which assets belong in a fund wrapper and which do not.
The limitation worth stating: direct holding removes the fund’s insolvency from the picture and replaces active management with your own decisions. That is a real trade and it is not automatically the better side of it. This case is an argument for knowing which one you have chosen.
Sources
- Verified Petition Under Chapter 15 for Recognition of a Foreign Main Proceeding and Related Relief, In re Three Arrows Capital, Ltd, No. 22-10920 (Bankr. S.D.N.Y.), Docket No. 2, filed 1 July 2022.
- Order (A) Authorizing Issuance of Subpoenas and (B) Granting Related Relief, In re Three Arrows Capital, Ltd, No. 22-10920 (MG) (Bankr. S.D.N.Y. 6 December 2022), Docket No. 71.
- Memorandum Opinion and Order Granting in Part and Denying in Part the Foreign Representatives’ Service Motion, In re Three Arrows Capital, Ltd, 647 B.R. 440 (Bankr. S.D.N.Y. 2022), Docket No. 79, 29 December 2022.
- Memorandum Opinion Granting the Foreign Representatives’ Motion to Compel, In re Three Arrows Capital, Ltd, No. 22-10920 (MG) (Bankr. S.D.N.Y. 22 March 2023), Docket No. 93.
- Order Denying the Foreign Representatives’ Motion for Contempt and Sanctions, In re Three Arrows Capital, Ltd, No. 22-10920 (MG) (Bankr. S.D.N.Y. 11 August 2023), Docket No. 112.
- Notice of Entry of BVI Court Orders, In re Three Arrows Capital, Ltd, No. 22-10920 (MG) (Bankr. S.D.N.Y.), Docket No. 128, filed 9 April 2024.
- Status Report in Response to Order to Show Cause, In re Three Arrows Capital, Ltd, No. 22-10920 (MG) (Bankr. S.D.N.Y.), Docket No. 141, filed 24 March 2026.
- In re Three Arrows Fund, Ltd (In Liquidation), No. 24-10210 (MG) (Bankr. S.D.N.Y.): Chapter 15 petition, Docket No. 1, filed 8 February 2024; objection of the foreign representatives of Three Arrows Capital, Ltd, Docket No. 15, 29 February 2024; Order Granting Recognition and Relief in Aid of a Foreign Main Proceeding, Docket No. 32, signed 11 March 2024.
- Zhu Su v Three Arrows Capital Ltd [2025] SGCA 31 (Court of Appeal of the Republic of Singapore, 24 June 2025).
- Monetary Authority of Singapore, “MAS Reprimands Three Arrows Capital for Providing False Information and Exceeding Assets Under Management Threshold”, 30 June 2022.
- Monetary Authority of Singapore, “MAS issues Prohibition Orders against Three Arrows Capital’s Zhu Su and Kyle Livingston Davies”, 14 September 2023.
- Joint liquidators’ statutory notices, Three Arrows Capital, Ltd (in Liquidation), published at 3acliquidation.com: Notice of Appointment, 30 June 2022; First Distribution notice, 2 April 2024; Second Distribution notice, 28 June 2024; Third Distribution notice, 14 October 2024; Seventh Notice of Intention to Distribute, 4 March 2026; Eighth Notice of Intention to Distribute, 1 June 2026; Notice of the liquidators’ application for the court examination of Zhu Su and Kyle Davies, 8 June 2023.
- Ogier client note on the interim distribution application, 1 May 2024.
Related on this desk
- Atom Holdings: two retail investors wound up a crypto exchange — the Cayman counterpart, wound up by two retail creditors rather than by a fund’s own collapse.
- FTX: what happens to your coins when the exchange files Chapter 11 — the United States process running in parallel over some of the same counterparties.
Corrections
None. This article has not been published.
Disclosure. Max Avery is affiliated with Digital Ascension Group (DAG). Investment advisory services are offered through DAG Wealth, an SEC-registered investment adviser (CRD No. 328627). Registration does not imply a certain level of skill or training. DAG is not a law firm and does not provide legal or tax advice. Custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them. Nothing here is investment, legal, or tax advice, or a recommendation to buy or sell any asset. This article describes matters of public record; charges are allegations and defendants are presumed innocent unless and until proven guilty.