The collapse of Three Arrows Capital (3AC) continues to unravel as co-founder Kyle Davies takes a drastic step by renouncing his U.S. citizenship. The U.S.-born Davies has declared that U.S. laws no longer apply to him, adding another layer of complexity to the ongoing liquidation of their failed hedge fund.
Renouncing Citizenship to Avoid Jurisdiction
Davies told a judge in the U.S. Bankruptcy Court for the Southern District of New York that he no longer views himself as under the jurisdiction of U.S. courts. This move comes after months of attempts to force Davies and 3AC co-founder Su Zhu to cooperate with the liquidation process to repay billions to investors.
The Ongoing Legal Battle
Liquidators in the British Virgin Islands put 3AC into Chapter 15 bankruptcy protection in the U.S. Despite this, the liquidators say that the founders have withheld crucial documents. A federal judge even approved subpoenas of Zhu and Davies, but Davies cited his renounced citizenship as cause for his lack of response.
Potential Contempt of Court
After failing to respond to the subpoena, lawyers for 3AC’s liquidators asked for Davies to be held in contempt of court, possibly subjecting him to a $10,000 per day fine. However, Davies and his lawyers argued that the court cannot enforce a subpoena against him as he is no longer a U.S. citizen.
Implications and Next Steps
The implications of Davies’ renunciation of citizenship are yet to be fully understood. U.S. financial regulators and criminal prosecutors can still issue enforcement actions against foreign nationals. The ongoing U.S. portion of the bankruptcy remains unclear, with a hearing scheduled for Aug. 8. This case could set a precedent in legal matters involving citizenship and jurisdiction, especially within the ever-changing crypto landscape.
Navigating Uncharted Legal Waters
In a turn of events that has captured attention worldwide, Davies has not only renounced his U.S. citizenship but also retreated to Bali with his co-founder, positioning himself outside the reach of U.S. courts. This unique legal situation leaves many questions unanswered about the future of the bankruptcy process and the reach of U.S. legal jurisdiction. As the saga unfolds, all eyes are on the August 8 hearing, which may set a precedent for how U.S. courts handle such unprecedented cases in the future. The retreat to Bali and the renouncement of citizenship add layers of complexity to an already intricate legal case, reflecting the uncharted waters that regulators and the legal system must navigate in the rapidly evolving world of finance and cryptocurrency.
