The High Court of Singapore presented Greenlights Defiance Capital with 3AC

Singapore's High Court in April rejected an application by bankrupt crypto hedge fund Three Arrows Capital (3AC) to dismiss a lawsuit filed by Cheng Jun Yong, otherwise known as Arthur Cheng. Cheng is the founder of Web3 investment firm Defiance Capital.

Cheng filed a lawsuit in April 2023 that Defiance Capital's investors are the ultimate beneficial owners of assets held in trust by 3AC and that 3AC's assets should not use those funds to satisfy creditors' claims.

The Claimant has reached an agreement with 3AC founders Su Zhu and Kyle Davies to “create an independent and independent fund on the 3AC Group platform owned and managed by the Claimant.” The fund had access to 3AC resources such as middle and back office infrastructure, fund managers and auditors.

The fund, eventually named Defiance Capital, separated accounts and wallets in Cheng's name. It paid Zhu and Davis 25% of the fees they brought in. As of May 2022, Defiance Capital's accounts held 22.3 million USDT (USDT) and $93.8 million in other cryptocurrencies and fiat. 3AC created sub-accounts for DeFiance Capital in its FTX and Binance accounts and a separate workspace on 3AC's security provider, FireBlocks.

1/ A decision from @DeFianceCapital in Singapore regarding its lawsuit against 3AC has been made public and contains some interesting points around cryptoassets and fiduciary relationships.

For context, I was working with @Arthur_0x on this last year.

— wassielawyer (@wassielawyer) January 31, 2024

When 3AC moved its headquarters to Dubai in 2022, Defiance Capital spun out of 3AC and merged as two entities in Singapore. Certain assets have not been transferred to DeFiance Capital as previously agreed. The value of these assets was not disclosed in the court decision.

3AC declared bankruptcy in July 2022, and Singapore's High Court allowed DeFiance Capital to sue 3AC's assets in November to acquire assets still under 3AC's control. 3AC filed a claim on the same day.

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3AC claims the claim is invalid, but the court found that the crypto in Fireblocks wallets, which remained under 3AC's control, was bona fide.

It is not uncommon for a trust to exist, even if it contradicts what the relevant legal documents say.

In addition, Singapore was a suitable forum for the suit because the person who controlled the keys to the wallet was there and the country was “sufficiently bound” by Singapore law.

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