Liquidators Accuse 3AC of Using Cash on a $50 Million Yacht

Liquidators claimed in a court filing made public on Monday that bankrupt crypto firm Three Arrows Capital (3AC) used borrowed funds, in part, to purchase a $50 million yacht, while telling a court that founders Su Zhu and Kyle Davies had failed to “meaningfully engage” with their wide range of creditors.

“In addition to ignoring any attempts by the company’s creditors to reach out to the company, Su Zhu and Kyle Davies … reportedly made a down-payment on a $50 million yacht, with the yacht to be delivered sometime in the next two months in Italy, at which point the remaining purchase price will presumably fall due,” attorneys wrote in the filing, which was dated July 9 but only made public on Monday. They also noted there had “been speculation that the yacht was purchased with borrowed funds.”

Attorneys returned to the yacht on several occasions, citing it on seven pages of their 1,157-page filing. As part of the evidence underscoring their concern over their issue, they included testimony delivered by Blockchain.com’s chief strategy officer, Charles McGarraugh, to a court in the Virgin Islands, which ordered 3AC into bankruptcy last month. McGarraugh told that court it was his “understanding that Mr. Davies intends this yacht to be larger than any yacht owned even by Singapore’s richest billionaires.

“Further, I am aware that others in the crypto industry have speculated that the yacht was purchased with borrowed funds,” McGarraugh added.

3AC owes McGarraugh’s Luxembourg-based employer $270 billion. It owes another $650 million to Toronto-based exchange Voyager Digital, $80 million to Panama-based exchange Deribit, and millions more to a range of other creditors. It blew the cash on leverage trading, making bad bets on the price of crypto.

A court in the Virgin Islands ordered 3AC into bankruptcy toward the end of June at Blockchain.com and Deribit’s behest. The company filed for bankruptcy in New York the subsequent week in an effort to control how its assets were liquidated.

However, creditors have complained that they have been unable to locate the firm’s 36-year-old co-founders, Zhu and Davies, accusing them in New York this month of refusing to even appear on camera for court-related Zoom proceedings.

In the filing in Singapore, attorneys belabored what they referred to as “prolonged radio silence” from Zhu and Davies, who said they said had “refused to meaningfully engage (or even engage at all) with creditors) despite the company’s well-publicized financial woes.”

The filing noted the duo responded through an attorney that they were maintaining silence “due to alleged threats directed at their families” but “intended to cooperate with the liquidators in good faith.”

You can read the full document that liquidators filed in Singapore embedded above.