Singapore High Court Advances DeFiance Capital’s Lawsuit Against Three Arrows Capital
The High Court of Singapore has decided not to dismiss a lawsuit filed by Cheong Jun Yoong, also known as Arthur Cheong, founder of Web3 investment firm DeFiance Capital, against the bankrupt cryptocurrency hedge fund Three Arrows Capital (3AC) in April. The legal dispute centers around whether funds held by 3AC were meant to be held in trust for DeFiance Capital or if they belonged to 3AC.
Cheong’s lawsuit, filed in April 2023, argues that investors of DeFiance Capital were the rightful owners of the assets that 3AC held in trust and insists that these funds should not be used to settle creditor claims against 3AC. DeFiance Capital, which had separate accounts and wallets under Cheong’s name, paid a fee to Zhu and Davies, co-founders of 3AC, amounting to 25% of its earnings. By May 2022, these accounts held 22.3 million USDT and $93.8 million in other cryptocurrencies and fiat.
The Singapore High Court’s decision on Cheong’s claim. Source: Singapore High Court
When 3AC relocated its headquarters to Dubai in 2022, DeFiance Capital was moved out of 3AC and established as two separate entities in Singapore. Some assets, however, were not transferred to DeFiance Capital as previously agreed, though the court decision did not specify the value of these assets.
Following 3AC’s bankruptcy declaration in July 2022, the Singapore High Court, in November, permitted DeFiance Capital to proceed with its lawsuit to reclaim assets still under 3AC’s control. On the same day, 3AC responded with counterclaims.
The court recognized that the cryptocurrency in the Fireblocks wallets, still controlled by 3AC, was indeed held in trust, countering 3AC’s argument that the claim was baseless. The court also determined that Singapore was the correct jurisdiction for the lawsuit, given the location of the person holding the wallet keys and the country’s significant connection to the case under Singapore law.
