3AC breaks silence – ‘good faith’ was received as bait

Three Arrows Capital co-founder Su Zhu has broken his silence after a long absence from social media.

On his Twitter account on Tuesday, he posted screenshots of an email sent by his legal advisor to legal representatives of the 3AC liquidators.

Along with the images, he alleged that the liquidators used his “good faith” in cooperating with them as a “bait”. That is, the companies that liquidated Three Arrows would have ignored the company’s attempts to work with them.

Sadly, our good faith to cooperate with the Liquidators was met with baiting. Hope that they did exercise good faith wrt the StarkWare token warrants. pic.twitter.com/CF73xI8r6n

— Zhu Su 🔺 (@zhusu) July 12, 2022

What the parties say

In legal documents filed July 8, lawyers for 3AC’s liquidators said that Zhu and the company’s other co-founder, Kyle Davies, “have not yet begun to cooperate significantly”.

Additionally, Russell Crumpler and Christopher Farmer stated that the location of the 3AC leaders was unknown. So there was a “high risk” that Zhu and Davies would try to transfer the company’s assets to other accounts.

As a consequence, this left many of the company’s investors and customers distressed.

Three Arrows legal adviser Christopher Daniel – of the law firm Advocatus Legal LLP – said his clients had suffered threats of physical violence. Furthermore, he pointed out that this was not in the document.

Furthermore, he said they had to face several queries from the Monetary Authority of Singapore. And, “they worked under a lot of time pressure” to respond to queries.

3AC did not receive copies of the documents

In screenshots posted by Zhu on Tuesday, Daniel says that 3AC did not receive copies of court documents filed in New York last Friday, July 8th.

The second email Zhu shared is also worth mentioning. After all, the content of the email accuses the liquidators of not exercising an offer to buy StarkWare tokens. This would have caused 3AC to “lose substantial value”.

StarkWare is an Israel-based company working on a Layer 2 scaling solution from Ethereum Starknet.

About the 3AC case

Founded in 2012 by Su Zhu and Kyle Davies, Three Arrows Capital has grown into one of the largest cryptocurrency hedge funds. However, the company was heavily impacted by the recent crypto market slump.

In the month of May, the fund suffered significant losses during the collapse of the Terra ecosystem. This is because the fund invested massively in the native token LUNA, which ended up going to zero after the collapse of the stablecoin UST.

3AC lost about $200 million after the project collapsed. In mid-June, as reported by Cryptheory, 3AC suffered liquidations in the order of US$ 400 million. As a result, the company began to face a potential risk of insolvency.

Finally, 3AC filed for bankruptcy protection last month following the collapse of Voyager, which had unpaid loans to 3AC totaling $646 million.