U . S . Court Authorizes Service of Subpoena on U . S . Nationals through Social Media While Prohibiting the Issuance of a Subpoena on Foreign Nationals Abroad BY MICHAEL B . SCHAEDLE AND EVAN JASON ZUCKER period , calling into question Three Arrows ’ solvency and provided the agency with false and misleading information about its assets , liabilities , and value .
Corrupt managerial behavior has been a driver in the collapse of the cryptocurrency market . Enforcing and defending claims against directors and officers , where the directors and officers are not living in the United States and may not be U . S . citizens , is a current judicial focus in the U . S . litigation system . In the Three Arrows Capital (“ Three
Arrows ”) chapter 15 case , the U . S . Bankruptcy Court for the Southern District of New York ( the “ U . S . Bankruptcy Court ”) addresses founder misconduct
1 and defines the limits of the United States ’ broad discovery tools to aide a letterbox jurisdiction , like the British Virgin Islands (“ BVI ”), in corralling bad actors and subjecting them to forensic examination .
The Collapse of Three Arrows and the Obfuscations of its Founders ’ Location Three Arrows managed and invested digital assets . It was founded by Kyle Davies and Su Zhu . Davies was born in the United States , but he holds Italian and Singaporean passports . It is not known whether Davies renounced his U . S . citizenship but , as a matter of law , a person born in the United States is presumed to be a U . S . citizen . 2 Zhu was born in China and lived in San Francisco for some period of time in the last decade . Zhu , however , currently does not reside in the United States and his current residence is unknown . Zhu listed his nationality as Singaporean in company records .
On June 27 , 2022 , Three Arrows commenced an insolvency proceeding in the BVI . The BVI court appointed joint liquidators to investigate and recover assets for Three Arrows ’ creditors . Prior to its liquidation , Three Arrows allegedly had over three billion dollars in assets under its management . At the direction of Davies and Zhu , these assets funded deals with cryptocurrency companies globally , including in the United States and Singapore . According to a Singaporean government agency , Three Arrows ’ investment arm breached asset management protocols for a prolonged
Thereafter , Davies and Zhu refused to provide the liquidators with “ seed phrases ” ( a series of passwords that grant access to a cryptocurrency wallet ) and other information necessary to access and control Three Arrows ’ digital assets . Thus , in early July , the liquidators commenced proceedings in the United States and Singapore to aid their efforts in investigating , recovering , and , ultimately , distributing assets to creditors . In the U . S . proceeding , the liquidators filed an emergency application seeking , on a provisional basis , to require the founders to disclose information to access company cryptocurrency . The U . S . Bankruptcy Court granted the application and authorized the liquidators to issue subpoenas to any person with relevant information .
Davies and Zhu , however , were not cooperative . Specifically , they failed to provide the liquidators with Three Arrows ’ books and records , remained unavailable for meaningful discussions with the liquidators , and refused to provide the liquidators with their current locations . Without their current locations , the liquidators were unable to formally serve Davies and Zhu with subpoenas to compel the production of the missing information . The founders ’ Singaporean counsel , their intermediary with the liquidators , declined service on their behalf . Additionally , Three Arrows ’ investment managers , also controlled by Davies and Zhu , refused to produce electronic copies of Three Arrows ’ books and records .
Left with no other choice , the liquidators sought authority to issue subpoenas on Davies and Zhu compelling the production of such documents . Additionally , given that the liquidators had no information regarding the present locations of Davies and Zhu , the liquidators sought permission to serve them by e-mail and Twitter .
The Territorial Limits of a U . S . Court to Authorize Foreign Discovery Rule 45 of the Federal Rules of Civil Procedure allows a party to serve a subpoena on any person requiring them to produce documents in their possession or control . A subpoena is served by delivering a copy to the recipient . A subpoena may be served anywhere within the United 19 • MAINBRACE