Three Arrows Capital Co-Founder Su Zhu Set for Release After Four-Month Jail Term

Su Zhu, co-founder of the collapsed crypto hedge fund Three Arrows Capital (3AC), is expected to be released from prison this month following a four-month sentence. His early release comes under standard provisions for good behavior, following a significant two-day court hearing in Singapore where Zhu faced extensive questioning from liquidators for the first time.

The court proceedings marked a critical development in the ongoing liquidation process that began when 3AC collapsed in 2022. Zhu, who was arrested at Singapore's airport on September 29, was jailed specifically for failing to cooperate with liquidation efforts. During the recent hearing, he was required to provide detailed responses to lawyers representing Teneo, the appointed liquidator, regarding the fund's failure and the current location of its assets.

Legal Proceedings and Asset Recovery Efforts

The court has approved the questioning of Zhu as part of the ongoing liquidation process, with details from these sessions to be shared with creditors to maximize potential asset recoveries. According to liquidation documents, Teneo estimates that creditors are owed approximately $3.3 billion, highlighting the massive scale of 3AC's collapse.

Liquidators have been actively pursuing both Zhu and his co-founder Kyle Davies, seeking to recover approximately $1.3 billion from the pair. While Zhu has now appeared in court, authorities globally continue their efforts to locate Davies, as reported in October.

Despite the serious nature of the fund's collapse, it's important to note that the proceedings between Zhu and Teneo's representatives remain a civil matter. Neither Zhu nor Davies has faced criminal charges in Singapore related to the fund's failure.

Conflicting Claims and Regulatory Response

Prior to his arrest, Zhu had claimed that liquidators were actively resisting and baiting his and Davies' "sincere efforts to cooperate." Email correspondence submitted to a New York bankruptcy court revealed that counsel for both co-founders dismissed the court orders obtained by liquidators as "baseless."

The regulatory response has been significant. In September, Singapore's central bank imposed nine-year prohibition orders on both Zhu and Davies, citing risk management failures and the provision of false information as key factors in their decision.

Background of 3AC's Collapse

Three Arrows Capital, once considered one of the largest and most successful crypto hedge funds in the industry, collapsed in 2022 as its leveraged investment positions deteriorated. The fund's failure contributed significantly to a $2 trillion downturn in the crypto market and caused widespread turmoil across the sector.

The fund initially operated out of Singapore before shifting its registration to the British Virgin Islands. Following its collapse in June 2022, a British Virgin Islands court appointed Teneo to liquidate the fund's assets, initiating the ongoing recovery process that continues to unfold.

The case highlights the significant challenges facing investors and creditors in the aftermath of major crypto fund failures, particularly regarding asset recovery and regulatory accountability in cross-border jurisdictions.