(Bloomberg) -- Three Arrows Capital liquidators are seeking to recover $1.3 billion from the co-founders of the failed crypto hedge fund, an amount that reflects losses the founders are accused of racking-up in the months before the firm collapsed, according to a person familiar with the liquidators’ claims.

The liquidators discussed the allegations against Three Arrows co-founders Su Zhu and Kyle Davies at a Tuesday meeting with the hedge fund’s creditors, the person said. 

Zhu and Davies are accused of causing Three Arrows to take on significant leverage between May and June 2022 after the hedge fund suffered big losses on ill-fated Luna tokens and other investments, the person said. The firm was already insolvent, liquidators contend, and now they’re taking action against Zhu and Davies in a British Virgin Islands court to recover those losses for the firm’s creditors, the person said.

Lawyers who have represented Zhu and Davies didn’t immediately return messages seeking comment. Zhu said in a Twitter post last June that his and Davies’ good faith efforts to cooperate with liquidators “was met with baiting.”

Three Arrows’ failure occurred amid a downturn in digital currencies and rippled to platforms that had exposure to the hedge fund including BlockFi and Voyager Digital Ltd., which filed bankruptcy weeks after the hedge fund went into liquidation.

Liquidators’ allegations against the co-founders escalate actions they’ve taken against Zhu and Davies, whom they’ve accused of not meaningfully cooperating with their investigation. The liquidators, partners at the consulting and advisory firm Teneo, were appointed by a BVI court last year and are attempting to recover funds for Three Arrows creditors who are owed roughly $3.3 billion. 

Earlier this month, liquidators urged a New York bankruptcy judge to fine Davies $10,000 per day, saying in a court filing that a substantial fine is warranted because he hasn’t responded to a subpoena seeking business records and other information. The liquidators have said they don’t know where Davies or Zhu are currently residing but in court papers earlier this month referenced a New York Times article that reported Davies flew to Bali after Three Arrows collapsed.

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