Three Arrows liquidators seek $40m from co-founder’s wife

Liquidators for collapsed crypto hedge fund Three Arrows Capital have filed a claim against Dr Evelyn Tao Yaqiong, the wife of co-founder Zhu Su, seeking about $40 million from the proceeds of a Dubai villa sale.

Court filings state the villa was bought in 2022 for about AED110 million (around $30 million) and link the purchase to an alleged $50 million cryptocurrency loan from Three Arrows to Zhu shortly before the fund entered liquidation.

The property was sold in January 2024 for about AED146 million, producing roughly AED36 million to AED40 million in sale proceeds that liquidators say should be returned to the estate and are now seeking to recover from Dr Tao.

Liquidators allege ownership of the Dubai residence was transferred to Dr Tao in October 2023 while Zhu was serving a prison sentence in Singapore for contempt of court related to his failure to disclose information about the fund’s assets and dealings.

They contend the transfer was made without payment and intended to place the asset beyond the reach of creditors, and that Zhu did not disclose the property during the liquidation process despite obligations to do so.

Dr Tao denies the allegations in court filings and has asked the court to dismiss the claim. Her defence maintains the villa was a gift given in good faith and that she had no knowledge of any misuse of Three Arrows Capital funds or breach of fiduciary duty by Zhu.

Her filings add that Zhu had previously bought properties for her and their children and that the Dubai home was intended as part of the family’s planned relocation while Three Arrows expanded its presence in the emirate. The documents note the couple’s relationship deteriorated in 2022 but say separation was not formalised until January 2024.

The lawsuit over the villa is among a series of recovery actions by Three Arrows’ liquidators to maximise returns for creditors. The fund collapsed in June 2022 after a sharp downturn in cryptocurrency markets, leaving creditor claims in excess of $3 billion.

Liquidators have previously sought more than $1.3 billion from the co-founders and continue to recover assets and make interim distributions to creditors as funds are recovered through the liquidation process.

The litigation over the Dubai sale remains before the courts as both sides present their arguments.