Three Arrows’ Founder Refused to Comply With Subpoena, Stonewalling Probe, Court Told

The collapsed hedge fund’s founder Kyle Davies was accused of neglecting his duties as he “shamelessly” promotes his new crypto project.

AccessTimeIconFeb 8, 2023 at 9:01 a.m. UTC
Updated Feb 8, 2023 at 7:04 p.m. UTC

Kyle Davies refused to comply with a court subpoena for the books and records of his former crypto hedge fund Three Arrows Capital, a New York court was told in a Tuesday night filing.

Davies was accused of stonewalling a probe into the company, which managed as much as $3 billion in assets before collapsing last year, while “shamelessly” promoting new crypto ventures.

Davies and co-founder Su Zhu “have refused to meaningfully engage,” said a filing on behalf of Russell Crumpler and Christopher Farmer, who now represent the bankrupt company. Davies and Zhu “have made only selective and piecemeal disclosures” and “refusal to cooperate violates their duties owed to Three Arrows,” it added.

Farmer and Crumpler attempted to serve a court-approved subpoena to Davies via Twitter on Jan. 5, but were ignored despite Davies’ active social media presence, the document said.

“He has not even attempted to reach out to undersigned counsel to voice an objection or concern with the topics of the subpoena,” the filing said. “This is not a question of partial compliance, but of no compliance whatsoever.”

“All the while, Mr. Davies has continued to post on his Twitter account, openly ignoring the Court’s directives and enjoying media attention while he continues to thwart efforts by the Foreign Representatives to gain access to documents and information,” the filing said.

Three Arrows’ collapse in June heralded a new crypto winter. Companies with exposure such as Voyager Digital, Celsius and Genesis Asia Pacific (which, like CoinDesk, is part of the Digital Currency Group) have since filed for bankruptcy, and Three Arrows’ new management takes a dim view of reports that Zhu and Davies are now apparently already looking to new ventures.

“Shamelessly, while ducking his obligations to his failed company, Mr. Davies has been recently active in an effort to raise tens of millions to start a new crypto exchange called ‘GTX,’” the filing said.

Farmer and Crumpler are seeking to compel Davies to comply with the subpoena, a request due to be considered at a March 2 hearing.

Counsel for Davies and Zhu did not immediately respond to a CoinDesk request for comment. In a January interview with CNBC, Davies said he had been “contactable the entire time” and “cooperating the whole way,” and denied that he was in Indonesia due to its weak extradition laws with the U.S.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.