A co-founder of bankrupt crypto hedge fund Three Arrows Capital dodged having to pay a potentially hefty fine for not responding to a subpoena sent to him over social media by liquidators attempting to recover money for creditors.
Judge Martin Glenn ruled Friday that Kyle Davies wasn’t properly served over social media because he wasn’t a US citizen at the time the New York bankruptcy court issued the subpoena. Davies’ lawyers submitted documentation earlier this month establishing that he renounced his US citizenship at the end of 2020 and is a citizen of Singapore, which doesn’t permit dual citizenship.
Three Arrows’ liquidators wanted the judge to hold Davies in contempt and issue a $10,000 per-day fine until he responded to the subpoena or turned over documents. Liquidators sought to deliver the subpoena over Twitter — an unusual request — because they said they aren’t sure where Davies is currently residing and he frequently posts on the social media platform now named X.
In his ruling Friday, Glenn said he had presumed, based on the information available to him at the time, that Davies was a US citizen. The judge said he gave Davies the option of correcting the record, which he ultimately did.
Davies’ filing on the status of his citizenship was the first time his lawyers responded in the New York bankruptcy proceeding that began in July 2022, soon after Three Arrows unraveled. The judge previously declined to issue a subpoena to co-founder Su Zhu, who was born in China.
Liquidators have accused Davies of flouting the judge’s orders, while Davies’ lawyers accused liquidators of refusing to correct the court record on the status of his citizenship. Liquidators are seeking to recover as much as $1.3 billion from him and Zhu, reflecting losses the founders are accused of racking-up in the months before Three Arrows collapsed.
Davies’ lawyers and a representative for the liquidators didn’t immediately return messages seeking comment.
The case is Three Arrows Capital Ltd., case number 22-10920, in the US Bankruptcy Court District of New York (Manhattan).
