3AC Subpoenas Issued As Dispute Grows Over Claims Of Terraform Dump

A federal judge overseeing the bankruptcy proceedings of Three Arrows Capital (3AC) has signed an order authorizing the delivery of subpoenas to 3AC’s former leadership, including co-founders Su Zhu and Kyle Davies.

The subpoenas demand that the founders turn over any “recorded information, including books, documents, records, and papers” in their possession relating to the firm’s property or financial affairs.

On July 1, the infamous hedge fund, worth $10 billion at its peak, filed for Chapter 15 bankruptcy, blaming its troubles on too much leverage and the collapse of Terra Luna (LUNA), now Terra Classic (LUNC), and its algorithmic stablecoin TerraUSD (UST).

Since then, the liquidators, Teneo, have been attempting to locate the firm’s assets and identify the 3AC’s co-founders.

The most recent order authorizing the subpoenas will require recipients to turn over any and all account information, seed phrases, and private keys for its digital and fiat assets, as well as information about securities and unregistered shares, and any accounts held on centralized or decentralized exchanges, as well as any other tangible or intangible assets.

In addition to trading desk company Tai Ping Shan Limited, venture capital firm DeFiance Capital, 3AC-backed NFT fund Starry Night Capital, and all of their associates, the order names hedge fund attorney Hannah Terhune, directors Mark Dubois and Cheuk Yao Pau, and Kelly Chen — wife of co-founder Kyle Davies — as “discovery targets.”

Individuals served with the subpoena must comply within 14 days, unless otherwise agreed upon by the parties.

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At the time of writing, there is no solid information on Zhu’s or Davies’ whereabouts; it is rumored that Zhu is in Dubai, while Davies is on the Indonesian island of Bali. Both have been active on social media, commenting on the collapses of FTX and Alameda research.

Claim: Terraform dumped $450M UST before crash

Meanwhile, self-proclaimed Terra whistleblower FatMan has made new claims on Twitter that the de-pegging of TerraUSD (UST), now TerraClassicUSD (USTC), in May was the result of Terraform Labs’ own actions, rather than a coordinated attack.

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However, not everyone is convinced of the theory or that the information is novel.

FatMan cited “bombshell data” from anonymous researcher Cycle 22 in a Dec. 6 Twitter thread, claiming that two trading wallets owned by Terraform Labs “dumped” $450 million worth of UST on the open market in the three weeks leading up to the de-peg, explaining:

“TFL has been perpetrating the narrative that UST was ‘attacked.’ This is a false flag.”

“In reality, TFL themselves weakened the Curve pool by irresponsibly dumping a massive amount of UST in a short timeframe. This reduced liquidity and severely weakened the peg,” FatMan said.

However, some Twitter users responding to the thread stated that TFL was withdrawing UST from a Curve liquidity pool (3Pool) in preparation to seed its new stablecoin liquidity pool (4Pool) with Frax Finance at the time.

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Others, such as Twitter user RyanLion, stated that the UST swaps into the curve pool were part of a move to swap UST into other stables. In order to purchase Bitcoin (BTC) for the Luna Foundation Guard reserves.

According to a June blog post from blockchain firm Chainalysis, while Terraform Labs withdrew millions of UST from 3Pool at the time (approximately 150 million).

It was the actions of two traders in the hour following — swapping a total of 185 million UST for USDC and TFL’s response to that — that caused the depeg and subsequent panic sell-off.