Three Arrows, once a prominent crypto-native hedge fund, faced significant losses in 2022 due to unfortunate Luna token investments, leaving creditors owed $3 billion.
The co-founders, Zhu and Kyle Davies, initially went into hiding but later resurfaced in Dubai, where they were involved in launching OPNX, a platform for tokenized bankruptcy claims.
During their absence, Zhu and Davies engaged in a dispute with Teneo, the firm appointed to unwind Three Arrows, accusing each other of non-cooperation.
Teneo criticized the founders for failing to cooperate, with Davies continuing to post on social media, ignoring court directives.
In a surprising turn of events, Zhu was arrested at Changi Airport in Singapore for non-compliance with a court order, leading to a four-month prison sentence alongside Davies.
Singapore’s financial regulator had already banned them from regulated activity for nine years.
Legal actions against alleged crypto wrongdoing have become more frequent, with FTX co-founder Sam Bankman-Fried and others facing arrests and trials.
Zhu’s arrest marks another incident in a series of legal interventions in the crypto industry following high-profile business collapses and fraud scandals.
Dubai’s crypto regulator also fined Zhu, Davies, and OPNX’s management for rule violations.
In the US, authorities have been investigating whether Three Arrows misled investors and failed to register with local agencies.
Teneo plans to engage with Zhu while he is in prison to discuss Three Arrows’ matters and fund recovery.
The estate is auctioning Three Arrows’ assets to raise funds for creditors, including a $30 million sale attempt of the co-founders’ super-yacht, “Much Wow.”