Crypto Co-Founder Rejects US Bankruptcy Court Jurisdiction, Renouncing US Citizenship

Kyle Davies Renounces U.S. Citizenship

Kyle Davies, the co-founder of the now-bankrupt crypto hedge fund Three Arrows Capital (3AC), has filed documents with a U.S. Bankruptcy Court claiming he is now a citizen of Singapore and no longer a U.S. citizen.

In an Aug. 1 filing with the U.S. Bankruptcy Court for the Southern District of New York, Davies provided notarized and Apostilled copies of the form he submitted to renounce his U.S. citizenship on Dec. 15, 2020. He said he had been granted Singaporean citizenship following the issuance of a passport in January 2021 and was not “subjecting [him]self to, or accepting the jurisdiction of, the Courts in the United States.”

Court filings indicated that Davies renounced his U.S. citizenship at the U.S. Embassy in Singapore due to his intentions to live in the country long-term. He noted that he got married to a Singaporean national in 2017, gained permanent residency, and has two children in the country. Since Singapore does not allow dual nationality, he chose to renounce his U.S. citizenship.

The filing from Davies followed a subpoena issued at the request of 3AC liquidators, aiming to gain information on the collapse of the crypto hedge fund. Both Davies and 3AC co-founder Su Zhu were subpoenaed on Twitter — now Crypto.com — in January due to their physical whereabouts being unknown, but parties have argued Davies should be held in contempt of court after he ignored the order. Zhu, a Singaporean national, would likely not be subject to the subpoena if residing outside the United States.

Crypto Founders Face Legal Challenges Despite $1.3 Billion Debt

The whereabouts of crypto founders Zhu and Davies following the bankruptcy filing of 3AC in July 2022 has been the subject of much speculation and debate among crypto users affected by the market crash. According to an Aug. 1 filing, Davies has not been a United States citizen or resident since before the case began, and thus cannot be validly served with process as a non-party. As a result, the Service Order and Compel Order were based on the incorrect assumption that Davies is a U.S. citizen, and should therefore be vacated. The bankruptcy court will hold a hearing on Aug. 8 to discuss the matter.

Liquidators behind 3AC are seeking to recover around $1.3 billion from Zhu and Davies, with the firm owing creditors $3.5 billion. In response to the events leading to the collapse of 3AC, Zhu and Davies created Open Exchange, a platform for trading claims against bankrupt crypto firms. Additionally, Sotheby’s auctioned off several pieces from a nonfungible token collection formerly owned by the 3AC founders.

The emergence of Web 3.0, also known as the decentralized web, has created a surge in crypto scams and other security issues. Crypto.com and Crypto.net have become popular platforms for staking and trading crypto, while Crypto Tom Brady has become a household name for promoting crypto tax reform. As the crypto industry continues to expand, these issues will become even more important.