Singapore's Supreme Court Declines 3AC's Request to Dismiss Lawsuit from DeFiance Capital
Summary:
Singapore's Supreme Court has rejected Three Arrows Capital's (3AC) request to dismiss a lawsuit filed by Arthur Cheong of DeFiance Capital. Cheong has claimed that DeFiance Capital investors own the assets managed by 3AC and these should not be used to pay off 3AC's creditors. The court has validated these assets as a trust, countering 3AC's claims. The ruling also recognizes Singapore as the suitable jurisdiction for the lawsuit due to its significant links under the country’s law. 3AC declared bankruptcy in July 2022, and DeFiance Capital was later allowed to sue 3AC's estate to reclaim assets still under 3AC's control.
Singapore's Supreme Court has denied a request by insolvent cryptocurrency hedge fund Three Arrows Capital (3AC) to dispose of a legal action filed by Cheong Jun Yoong, also known as Arthur Cheong, in August. Arthur Cheong, being the Founding Director of Web3 Investment Corporation DeFiance Capital, lodged a lawsuit in April 2023 arguing that the ultimate beneficiaries of assets managed by 3AC were DeFiance Capital investors and 3AC shouldn’t use these assets to settle claims by its creditors. The ruling from the Singapore Supreme Court on Cheong’s case. Image Source: Singapore Supreme Court.
Cheong had previously negotiated a deal with Su Zhu and Kyle Davies to inaugurate a “standalone and autonomous fund on the 3AC Group platform, completely owned and managed by the complainant.” The fund was privy to 3AC's resources, including
its mid-office and back-office systems, and auditors. The fund, aptly named DeFiance Capital, had account and wallet separations under Cheong's authorization. It remunerated Zhu and Davies at a rate of 25% of the incoming fees it garnered. As of May 2022, accounts of DeFiance Capital harbored 22.3 million Tether (USDT) and $93.8 million in various cryptocurrencies and fiat currencies. Fireblocks, 3AC's custodian provider, created a separate workspace for DeFiance Capital in addition to 3AC making subaccounts for DeFiance Capital within its FTX and Binance accounts.
In 2022, when 3AC shifted its base to Dubai from Singapore, DeFiance Capital was rehomed out of 3AC and reincorporated as two separate entities in Singapore. However, not all assets were transferred to DeFiance Capital as per the previous agreement. The assets that were not transferred were not disclosed in detail in the court ruling.
In July 2022, after 3AC declared bankruptcy, DeFiance Capital was granted by the Singapore Supreme Court to take legal action against 3AC's estate to reclaim the assets still under 3AC's management. The same day, 3AC also filed mutual accusations.
Despite 3AC allegedly asserting that the claim made by DeFiance Capital was without merit, the court verified that the cryptocurrencies that were still within the Fireblocks wallets and under 3AC’s jurisdiction were a clear trust: “Trusts can be proved to exist even though the legal papers involved dispute it.”
Moreover, Singapore was cited as the ideal venue for the lawsuit due to the presence of the person controlling the wallets and the country's significant links under Singaporean law.
Published At
1/31/2024 10:49:04 PM
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