Singapore court dismisses appeal to lift freezing order on assets of wife of Three Arrows founder

The High Court of Singapore has dismissed an appeal from the wife of a founder of failed crypto hedge fund Three Arrows Capital (3AC) to lift the freezing order on her assets.

In a ruling on Jun 28 that was released on Monday (Jul 1), High Court Judge Philip Jeyaretnam threw out the appeal by Kelly Chen, wife of 3AC founder Kyle Davies, who had applied for the freeze on her Singapore assets to be discharged.

In December 2023, liquidators of the 3AC filed for and were granted a worldwide freeze on the assets of 3AC founders Zhu Su and Davies, as well as Chen, by a court in the British Virgin Islands (BVI).

The Singapore Court also granted a domestic freezing order, stating that the trio’s assets in Singapore should be covered by the same restriction.

For Chen, the liquidators sought to restrain her from disposing of her Singapore assets, and specifically named a Good Class Bungalow (GCB), among others.

Judge Jeyaretnam said the liquidators had made out a good, arguable case against Chen’s application.

While Chen argued that she made the request in February 2022, there were no follow-ups that one would ordinarily expect, given the size of the redemption and its likely importance.

This could be a good arguable case that no such request was made in February 2022, and that Chen was attempting to backdate her request to when the company was not obviously insolvent, in a bid to show that it was validly redeemed.

There was also a good arguable case that she was holding the assets as a nominee for her husband, Davies.

It was likely that she held her shares in TAFL as Davies’ nominee, given the mirroring of executed transactions between her and Zhu. Davies had no other shares in TAFL in his name.

Meanwhile, Chen conceded that S$1 million of the down payment for her GCB could be attributable to the TAFL shares, which could mean that Davies would have a beneficial interest in the property.

The liquidators also provided evidence of a number of dealings involving Chen and Davies, which suggested that the potential beneficial interests in the GCB should not be undertaken in isolation.

In addition, Judge Jeyaretnam said the liquidators demonstrated to the court the real risk of the dissipation of assets by Chen.

Having shown her to be a nominee of Davies, there was a risk of him giving instructions to her to dissipate the assets she was holding for him; this made his conduct relevant in assessing the risk of dissipation.

While a physical asset such as the GCB is much harder to dispose of quickly, an injunction is important to keep it within the potential pool of assets against which any BVI judgment might be enforced, the judge added.

Furthermore, the liquidators had complied with their duty to give full and frank disclosure of all material facts to the judge at the without-notice hearing.

The judge said most of the points made by Chen were peripheral and would not cross the materiality threshold, even if they had been left out of submissions made to the court.

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Three Arrows Capital Ltd and others v Davies, Kyle Livingston and another [2024] SGHC 164

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