Liquidators for collapsed crypto hedge fund Three Arrows Capital (3AC) are pursuing legal action against the wife of co-founder Zhu Su in a bid to recover approximately $40m from the sale of a Dubai property they allege was acquired using misappropriated fund assets, according to a report by Business Times.
The report cites court filings as showing that the liquidators claim the villa was purchased in 2022 for AED110m (around $30m) using funds linked to an alleged $50m cryptocurrency loan from Three Arrows Capital to Zhu shortly before the hedge fund entered liquidation following the collapse of the crypto market.
The property was sold in January 2024 for approximately AED146m, generating proceeds of around $40m. Liquidators are seeking to recover those sale proceeds from Zhu’s wife, Dr Evelyn Tao Yaqiong.
The claim alleges that ownership of the property was transferred to Dr Tao in October 2023 while Zhu was serving a prison sentence in Singapore for contempt of court after failing to comply with orders requiring him to disclose information about the fund’s assets and dealings.
Liquidators argue the transfer was made without payment and was intended to place the asset beyond the reach of creditors. They contend Zhu failed to disclose the Dubai property despite his obligations during the liquidation process and allege the transfer was designed to frustrate efforts to recover assets for creditors.
Three Arrows Capital collapsed in June 2022 after the sharp downturn in cryptocurrency markets, leaving creditors with claims exceeding $3bn. The fund’s liquidators have been pursuing a series of recovery actions against its founders as they seek to maximise returns for creditors.
Dr Tao has denied the allegations and is seeking to have the claim dismissed. In court filings, she maintains that she had no knowledge of any alleged misuse of Three Arrows Capital assets or breach of fiduciary duty by Zhu.
She argues the property was gifted to her in good faith and says she believed she was entitled to both ownership of the villa and the subsequent sale proceeds. According to her defence, Zhu had previously purchased properties for her and their children, and the Dubai villa was intended as part of the family’s planned relocation to the emirate while Three Arrows Capital expanded its presence there.
Dr Tao also disputes suggestions that the transfer was inconsistent with the couple’s personal circumstances, stating that although their relationship deteriorated during 2022, they did not formalise their separation until January 2024.
The latest lawsuit forms part of the liquidators’ broader recovery campaign. They have previously sought to recover more than $1.3bn from Three Arrows Capital’s co-founders as efforts continue to return assets to creditors. The estate has also continued making interim distributions as funds are recovered through the liquidation process.
