Singapore’s Monetary Authority (MAS) has issued nine-year prohibition orders against Kyle Davies and Su Zhu, co-founders of the cryptocurrency hedge fund, Three Arrows Capital (3AC). These orders, effective September 13, bar them from engaging in regulated activities and taking up roles such as management, directorship, or significant ownership in any capital market services business in Singapore.
MAS’s Decision Follows Regulatory Investigation
MAS’s decision to impose prohibition orders stemmed from its investigation into Three Arrows Capital (3AC). In June 2022, MAS had criticized the fund for providing false information to the public and the involvement of Zhu and Davies in Three Arrows’ entities in Singapore and the British Virgin Islands.
Specific Violations Found
MAS found several regulatory violations concerning Three Arrows Capital. The fund had failed to inform MAS when appointing a new fund manager and falsely claimed that the manager was not involved in regulated activities. Furthermore, Three Arrows Capital did not adhere to required risk management practices outlined by MAS.
MAS’s Response to Misconduct
Loo Siew Yee, Assistant Managing Director of Policy, Payments & Financial Crime at MAS, emphasized the seriousness of Zhu and Davies’ disregard for regulatory requirements and their neglect of directorial duties. MAS intends to take decisive action against senior managers involved in such misconduct.
Challenges Faced by Three Arrows Capital
In the past year, Three Arrows Capital (3AC) experienced significant losses in the cryptocurrency market, primarily due to the Terra ecosystem’s collapse. These losses have led to complications for 3AC, as it had accumulated substantial loans and invested in cryptocurrencies with borrowed funds.
Outstanding Debts and Legal Issues
Creditors have claimed that 3AC owes them up to $3.5 billion, and liquidators overseeing 3AC’s financial affairs are pursuing the recovery of approximately $1.3 billion from Zhu and Davies. Additionally, the crypto bankruptcy claims exchange OPNX, associated with Zhu and Davies, was fined nearly $2.8 million by Dubai’s Virtual Assets Regulatory Authority (VARA) in August. As of September 14, the fine remained unpaid, according to a notice issued at that time.
Singapore’s regulatory actions underscore the importance of adhering to securities laws and financial regulations within the cryptocurrency industry, emphasizing accountability and compliance among industry participants.