Singapore’s High Court Upholds DeFiance Capital Founder’s Trust Relationship in Landmark Ruling

The High Court of Singapore recently ruled in favor of DeFiance Capital founder, Arthur Cheong, in a lawsuit against bankrupt cryptocurrency hedge fund, Three Arrows Capital (3AC). The court recognized a valid trust relationship between DeFiance Capital and 3AC, establishing investors’ rights in cryptocurrency assets and trust law.

Arthur Cheong, the founder of Web3 investment firm DeFiance Capital, filed the lawsuit against 3AC in April 2023. Cheong argued that the assets in dispute were held in trust for DeFiance Capital’s investors and should not be used to settle creditor claims against 3AC.

The legal battle between Cheong and 3AC dates back to an agreement between Cheong and 3AC founders Su Zhu and Kyle Davies to launch an independent fund on the 3AC Group platform. Under this agreement, Cheong would own and control the fund, which had access to 3AC resources and maintained segregated accounts and wallets under Cheong’s name.

Despite the collapse of 3AC in July 2022 and its subsequent bankruptcy, DeFiance Capital was permitted by the Singapore High Court to sue 3AC’s estate to recover assets that were still under 3AC’s control. The court ruled that the cryptocurrency held in the Fireblocks wallets, which were under 3AC’s control, was held in trust, countering 3AC’s claims that DeFiance Capital’s claim was without merit.

This ruling has significant implications for the cryptocurrency industry and trust law. It affirms the trust relationship in the context of cryptocurrency assets and establishes the jurisdiction of Singaporean courts in resolving disputes related to digital assets. The decision sheds light on the legal complexities surrounding the control and ownership of digital assets in the evolving crypto landscape.

Investors and fund managers now have a precedent for securing and asserting their rights over digital assets, especially in cases where the entities holding these assets go bankrupt. This ruling provides clarity and protection for investors, ensuring that their interests are safeguarded in trust relationships involving cryptocurrency assets.