Bankrupt 3AC Founders Run Into Trouble Again As Regulators Impose 9-Year Ban

3AC

BANNED rubber stamp over a white background.

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has now issued long-term prohibition orders against Zhu Su and Kyle Davies, founders of the now-bankrupt crypto hedge fund Three Arrows Capital (3AC).

Singapore’s MAS Bans 3AC Founders From Business Activities

On Thursday, September 14, the Monetary Authority of Singapore disclosed in a statement that it has imposed a 9-year ban on Zhu Su and Kyle Davies for alleged violations of the country’s securities laws. The 3AC founders are now prohibited from engaging in regulated business activities in the Southeast Asian country.

A part of the statement read: 

Under the POs (prohibition orders), which took effect on 13 September 2023, Mr. Zhu and Mr. Davies will be prohibited from performing any regulated activity and from taking part in the management of, acting as a director of, or becoming a substantial shareholder, of any capital market services firm under the SFA.

In June 2022, Singapore’s financial regulator said it reprimanded 3AC for providing it false information, not telling about Su’s and Davies’ directorship, and exceeding the assets under the management threshold.

Not too long after, Three Arrows Capital was pushed to liquidation due to struggles precipitated by the collapse of the Terra ecosystem in May 2022.

3AC, once one of the largest hedge funds in the cryptocurrency industry, owed up to $3.5 billion to its creditors, according to claims at the time.

What Did The Regulator Find In Subsequent Investigations?

In the Thursday statement, the Monetary Authority of Singapore also revealed that it conducted further investigations into 3AC and its founders after the initial reprimand. The regulatory body claims to have found additional securities law breaches committed by the hedge fund between August 2020 and January 2022.

These violations included failing to notify MAS about the employment of Cheong Jun Yoong Arthur as a portfolio manager within the stipulated timeframe. The financial regulator also alleged that Three Arrow Capital falsely represented Mr. Cheong’s management activities.

What’s more, the Monetary Authority of Singapore claims that 3AC did not have an appropriate risk management framework to protect the digital assets under its care. The MAS said that co-founders Su and Davies failed to discharge their duties and were responsible for the company’s violations.

Loo Siew Yee, MAS’ assistant managing director, said in a statement:

Senior management of fund managers is required to implement robust risk management measures to protect the interests of investors. MAS takes a serious view of Mr Zhu’s and Mr Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties. MAS will take action to weed out senior managers who commit such misconduct.

The Three Arrows Capital founders recently got into trouble with Dubai’s virtual assets regulator, VARA (Virtual Assets Regulatory Authority) when the regulatory body imposed monetary fines against Su, Davies, and their new exchange, OPNX.

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