In the wake of Three Arrows Capital's precipitous fall from fame, a federal judge in a New York bankruptcy court has frozen the firm's remaining assets.
A few months ago, the fund, which was established nearly a decade ago, handled $10 billion in assets. Now, the company's two co-founders are in hiding from creditors seeking to recuperate their losses.
A British Virgin Islands court ordered the troubled fund to liquidate in order to pay off its debts prior to the bankruptcy filing.
Tuesday, the Southern District of New York's Judge Martin Glenn granted the emergency motion to freeze Three Arrows' assets. CNBC attended a court session when the next stages in the bankruptcy procedure were discussed.
In his written ruling, Glenn stated that only the appointed bankruptcy liquidators had the ability to "transfer, encumber, or otherwise dispose of any of the Debtor's assets located within the territorial jurisdiction of the United States."
As part of Glenn's ruling, the global advisory firm Teneo, which was tasked with managing the liquidation, was granted permission to subpoena Three Arrows co-founders Zhu Su and Kyle Davies, as well as banks, crypto exchanges, and other institutions and firms that have conducted business with the company.
Principally, there is apprehension that Three Arrows, commonly known as 3AC, and its management team may have siphoned off funds prior to the formal liquidation. According to Coindesk, Zhu is attempting to sell his $35 million Singapore house, and there are rumors of at least one other digital asset transfer involving a non-fungible token held by the firm.
Requests for feedback from Zhu and Davies went unanswered. Christopher Anand Daniel, the pair's attorney, of Singapore-based Advocatus Law declined to comment when contacted by CNBC.
According to Goldberg of the law firm Latham & Watkins, liquidators are searching for records like account statements and data from digital wallets.
Legal counsels for the creditors said Zhu and Davies' whereabouts are "now unknown," which is a primary cause for the aggressive move.
However, after a nearly month-long absence on Twitter, Zhu returned early Tuesday morning to tweet that the company's efforts to work with creditors had been met with "baiting."
Zhu released screenshots of emails sent by his attorney to lawyers representing liquidators from his verified account. The attorney noted in these letters that the co-founders' families "had received threats of physical assault."