Co-founder of Collapsed Crypto Hedge Fund Renounces US Citizenship, Evades Court Subpoenas Amid $1.3 Billion Liquidation Battle

Co-founder of Collapsed Crypto Hedge Fund Renounces US Citizenship, Evades Court Subpoenas Amid $1.3 Billion Liquidation Battle

According to Decrypt, Kyle Davies, one of the co-founders of the now-defunct crypto hedge fund, Three Arrows Capital (3AC), has claimed that he renounced his US citizenship, thereby asserting that he is not obliged to respond to US courts.

In court documents filed on Tuesday, Davies stated that he became a permanent resident of Singapore in 2017. As Singapore does not permit dual citizenship, he chose to renounce his US citizenship following his marriage, effectively placing himself outside the jurisdiction of the United States courts. To support his case, he submitted a copy of his Singaporean passport as evidence of his renunciation.

This development comes after months of persistent attempts to compel Davies and his fellow co-founder, Su Zhu, to cooperate with the liquidation process of their failed hedge fund, and to return the substantial funds owed to investors. The liquidators, acting on behalf of British Virgin Islands companies with assets in the region, sought Chapter 15 bankruptcy protection in the US, aiming to avail themselves of legal protections against creditors provided under US bankruptcy laws.

Despite an unusual extension of subpoenas against Davies and Zhu by the judges, no response has been received from either co-founder. As a consequence, the liquidators’ attorneys have taken the step of requesting that Kyle Davies be held in contempt of court, potentially incurring fines of $10,000 per day until compliance is achieved.

Notwithstanding Davies’ assertion that he is beyond the reach of US courts, it is worth noting that US financial regulators and criminal prosecutors retain the authority to initiate enforcement actions or pursue indictments against foreign nationals suspected of committing crimes within the United States or in connection with US residents or entities.

As previously reported, the liquidators of Three Arrows Capital are actively seeking to recover $1.3 billion from the co-founders, Su Zhu and Kyle Davies. The allegations against them include the use of significant leverage by the hedge fund between May and June 2022, which resulted in substantial losses, particularly on LUNA tokens and other investments.