A judge in the bankruptcy case of defunct crypto hedge fund Three Arrows Capital (3AC) has denied a motion that would have held co-founder Kyle Davies in contempt of court and imposed sanctions.

In an Aug. 11 filing with the United States Bankruptcy Court for the Southern District of New York, Judge Martin Glenn said rulings on motions regarding a subpoena issued to Davies via X — formerly Twitter — were considered without the knowledge the 3AC co-founder was a non-U.S. citizen residing outside the country. He cited federal laws for compelling compliance outside the U.S., adding that his approval of motions starting in December 2022 “presumed based on the record at that time that Mr. Davies was a United States citizen.”

On Aug. 1, lawyers for Davies filed evidence that he had applied to renounce his U.S. citizenship in December 2020 and had become a citizen of Singapore following his marriage to a national. Singapore does not allow dual nationality. His filing was in response to a contempt motion filed by 3AC’s foreign representatives in the U.S. bankruptcy case for a lack of response to the online subpoena.

“Until Mr. Davies filed his Opposition, the Court was operating under the presumption that Mr. Davies was a United States national, and that personal jurisdiction might be established at some point if that presumption continued to hold and other jurisdictional facts were proven,” said Glenn. “Because Mr. Davies’ United States citizenship was a prerequisite for valid service on him in the manner effected, he was not properly served with the subpoena issued by this Court.”

The judge hinted that the foreign representatives could consider compelling Davies’ compliance through Singaporean courts. He denied the contempt motion and said the U.S. court could largely not “exercise jurisdiction over Mr. Davies.”

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3AC co-founder Su Zhu, who was also issued a summons on X, is a Singaporean national and not subject to the subpoena, as he resides outside the United States. Both Zhu’s and Davies’ whereabouts have been largely unknown since the collapse of 3AC in July 2022, but Davies’ lawyers listed his Singaporean residence in the Aug. 1 filings.

Liquidators behind 3AC are seeking to recover roughly $1.3 billion in funds from the two co-founders, with the firm reportedly owing creditors $3.5 billion. In April, the pair helped launch Open Exchange, a platform aimed at allowing users to trade claims against bankrupt crypto companies.

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