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BVI Court Freezes $1 Billion in Assets of 3AC Founders Amid Ongoing Liquidation

This move is part of the ongoing efforts by liquidators to secure 3AC's assets and seek recoveries from the founders and Kelly Chen, wife of one of the co-founders.

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In a recent development related to the ongoing liquidation of crypto hedge fund Three Arrows Capital (3AC), a British Virgin Islands court has issued an order freezing more than $1 billion worth of assets belonging to 3AC's co-founders, Su Zhu and Kyle Davies, as well as Kyle Davies' wife, Kelly Chen.

Singapore-based 3AC filed for bankruptcy in July 2022, citing the extreme fluctuations in cryptocurrency markets as the reason for its business collapse. Since then, the liquidators, Teneo, have been diligently working to handle the insolvency and distribute assets to creditors.

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In a report to creditors, Teneo estimated that creditors would receive approximately 45.74% of their claims from the bankrupt estate. The estimated value of 3AC's assets as of December 18, 2023, stood at $1.16 billion, while claims totaling $2.7 billion are expected to be recognized for distribution, The Block reported.

Teneo also noted that it had settled litigation against several parties, including DCG, Genesis, and BlockFi, which had a positive impact on the firm's reported assets by an estimated $292 million. However, the BlockFi settlement remains subject to approval.

The report revealed that there were 154 claims filed against the 3AC estate, with a total value of $3.4 billion. Of these claims, $200 million were not admitted for distribution, while $322 million of claims have either been rejected or are expected to be rejected. Additionally, claims worth $76 million are currently being disputed.

The majority of assets held by the liquidators are illiquid tokens subject to vesting periods, accounting for 82% of assets. Only 6% of the portfolio is liquid, while equity and investments make up 6.9%, and 4.8% is in cash. The illiquid tokens consist of 13 different tokens with a combined value of $563 million at current prices. These tokens are subject to vesting schedules, with roughly $50 million of assets expected to be unlocked each quarter until the end of 2026, The Block said.

Liquidators have also staked some of these tokens, resulting in $5.4 million of staking rewards, while cash holdings generated $1 million in interest payments.

This freezing order from the British Virgin Islands court is specifically designed to prevent the founders and Ms. Chen from disposing of or otherwise dealing with assets in any way that might obstruct eventual enforcement by the liquidators. A Singapore court has also granted a similar freezing order, Teneo noted.

The liquidation of 3AC continues to be a complex process, with ongoing investigations and litigation involving various parties. Legal fees have amounted to $49.7 million during the bankruptcy proceedings.

Su Zhu was arrested in Singapore in October, whilst attempting to flee at the city's Changi Airport. Teneo confirmed Zhu's arrest but stated that the crypto villain was facing a committal order after failing to comply with a Singapore court order.

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