Three Arrows Capital Liquidators Sue Zhu Su's Wife for $40 Million
Three Arrows Capital, a crypto hedge fund in liquidation, is suing co-founder Zhu Su's wife, Evelyn Tao Yaqiong, to recover approximately 146 million dirhams (about $40 million) from the sale of a Dubai property.
The liquidators claim the property was purchased about three weeks before 3AC entered liquidation in June 2022 for approximately 110 million dirhams (about $30 million), with funds allegedly coming from a $50 million cryptocurrency loan Zhu Su obtained from 3AC. In October 2023, while serving a prison sentence in Singapore, Zhu Su transferred ownership to his wife, who then sold it for about $40 million in January 2024.
This event has expanded the liquidators' recovery efforts from the founders to their spouses' assets, increasing expectations for creditor fund recovery, putting pressure on Zhu Su's associates, and intensifying disputes over asset transfers in crypto bankruptcy cases.
Source: Public Information
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Three Arrows Capital collapsed in 2022 due to losses from the Luna crash, owing creditors over $3 billion, with liquidators previously seeking about $1.3 billion from the two founders; Zhu Su was imprisoned in Singapore for violating a court order, yet completed the property transfer during his sentence.
The liquidators accuse the founders of using company loans to purchase and transfer the property to evade recovery efforts, motivated by a desire to expand the pool of recoverable assets; resources have shifted from the founders' personal and corporate mixed assets to the spouse's name, then liquidated through sale, raising issues of fiduciary duty and fraudulent transfer.
Similar cases can be seen in other crypto bankruptcies where spouses' assets are pursued, as well as asset stripping lawsuits in traditional hedge fund liquidations; currently, 3AC's liquidation is transitioning from direct recovery from the founders to extending to related parties.
Essentially, this is about capital concentration: bankruptcy liquidation uses legal means to re-concentrate assets dispersed to spouses back into the creditor pool, with the mechanism being to prove the connection between the source of funds and the timing of the transfer, breaking through the nominal ownership barrier.
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- Assets purchased three weeks before liquidation are the easiest to recover.
- Assets in a spouse's name do not equate to true isolation.
- Bankruptcy recovery will ultimately touch family assets.