Singapore's Supreme Court Denies 3AC's Request to Dismiss Lawsuit by DeFiance Capital Founder
Summary:
The Supreme Court of Singapore has denied Three Arrows Capital's (3AC) request to dismiss a lawsuit filed by DeFiance Capital founder, Arthur Cheong. Cheong asserts DeFiance Capital investors are the rightful owners of assets currently held by 3AC, which should not be used to clear 3AC's debts. The court recognized the crypto assets in question as being held in trust, despite 3AC's disputes. As the lawsuit continues, Singapore was deemed the appropriate jurisdiction due to its significant connection to the case.
In a recent turn of events, the Supreme Court in Singapore has turned down a bid by the insolvent cryptocurrency hedge fund, Three Arrows Capital (3AC), to dismiss a legal lawsuit initiated against them by Arthur Cheong, also known as Cheong Jun Yoong, in April. Cheong is renowned for founding the Web3 investment firm, DeFiance Capital. The lawsuit filed by Cheong asserts that investors of DeFiance Capital are the rightful owners of assets that are in 3AC's custody and thus, these assets should not be utilized to settle the debts owed to creditors by 3AC.
Cheong previously negotiated with Su Zhu and Kyle Davies, the founders of 3AC, to start an independent fund under the umbrella of 3AC Group, which would be under Cheong's control and ownership. This fund would be able to utilize resources from 3AC such as administrative and auditing services, and office infrastructure.
The aforementioned fund, eventually known as DeFiance Capital, had separate accounts and digital wallets under the name of Cheong. It was agreed to contribute 25% of its fees received to Zhu and Davies. By May 2022, these accounts held an equivalent of 22.3 million USDT and $93.8 million in other digital and fiat currencies. For DeFiance Capital, 3AC established subordinated accounts on FTX and Binance, in addition to a distinct workspace on Fireblocks, its custody provider platform.
When 3AC migrated its headquarters to Dubai in 2022, DeFiance Capital was spun off and registered as two separate entities in Singapore. However, some assets were not transferred to DeFiance Capital, contrary to an earlier agreement, with the value of these assets not mentioned in the court ruling.
3AC filed for bankruptcy in July 2022, and the Singapore Supreme Court permitted DeFiance Capital to initiate a lawsuit against 3AC's estate to reclaim the assets in November, with 3AC filing counterclaims on the same day.
Despite the counterclaims made by 3AC, the court recognized the digital currencies in the Fireblocks wallets still under 3AC's control as assets held in trust. This validation occurred despite the fact that legal documentation stated otherwise.
In conclusion, Singapore was identified as the ideal location for this lawsuit, as it had jurisdiction because the person holding the keys to the wallets was situated there, establishing a strong enough connection under Singapore law.
Published At
1/31/2024 10:49:04 PM
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