Singapore’s central bank and regulatory authority, the Monetary Authority of Singapore (MAS), has dropped a bombshell on the global financial landscape.
Significantly, Kyle Davies and Su Zhu, the duo behind Three Arrows Capital (3AC), have been handed a nine-year prohibition order. This move comes in light of alleged infractions related to the country’s securities laws.
MAS bans Three Arrows Capital founders Su Zhu and Kyle Davies for 9 years following regulatory breaches.
🔹The duo's recent venture, OPNX, also fined $2.8M in Dubai.
🔸Do you think this was justified, or is this an overreaction of the MAS?— House of Chimera (@HouseofChimera) September 15, 2023
Ripple Effects of the Ban
Besides the nine-year restriction, Davies and Zhu are not allowed to manage, act as directors, or have a considerable stake in any capital market services in the vibrant city-state of Singapore.
Additionally, they cannot partake in regulated activities during the prohibition period. Hence, the order, which took effect on Sept. 13, is a resounding blow to their financial ambitions.
However, this isn’t the first time the co-founders of 3AC are facing regulatory scrutiny. Last June, just a day before filing for bankruptcy, the MAS reprimanded the hedge fund. This action was in response to allegations of feeding the watchdog false data, undisclosed changes in directorship roles, and breaching the legal cap on assets under management.
The bankruptcy filing itself was a consequence of the catastrophic cryptocurrency market crash. This collapse was instigated by the meltdown of the Terra ecosystem, leading to 3AC’s enormous liabilities.
Consequently, the firm’s leveraged crypto positions resulted in billions of dollars in loan defaults. Creditors are now after the founders, claiming debts of up to $3.5 billion.
NFT grails mooning on Sothebys, WorldCoin scanning millions of eyeballs, Aptos the next Solana
3AC Porfolio is on 🔥
— Kyle Davies 🐂 (@KyleLDavies) May 20, 2023
Moreover, on the other side of the globe, the Dubai Virtual Asset Regulatory Authority (VARA) fined the 3AC founders in connection with the OPNX exchange. VARA slapped a hefty fine on the exchange while issuing smaller penalties on executives, including Davies and Zhu, for defying the Emirate’s marketing regulations.
The 3AC Saga and Liquidation Blues
One year after 3AC was ordered into liquidation in the British Virgin Islands, the drama unfolds even further. Liquidators are hot on the trail, seeking to recover approximately $1.3 billion from Davies and Zhu. Reports suggest that this hefty sum was incurred as debt when 3AC was in dire financial straits, amplifying creditors’ woes.
*THREE ARROWS LIQUIDATORS SEEK $1.3 BILLION FROM FUND'S FOUNDERS
— zerohedge (@zerohedge) June 27, 2023
In a twist to the narrative, despite their financial predicament, Davies and Zhu have not faded away. They remain active on the virtual front, launching platforms for trading claims against other insolvent crypto entities.
However, only some of their ventures were successful. A new exchange platform they initiated showed promising trading volumes, which skyrocketed within months. Yet their triumphant streak was halted as regulators suspended the license of another crypto exchange for not adhering to set mandates.
Furthermore, liquidators face a Herculean task given the founders’ elusive nature. While the digital world might buzz with their activities, their physical whereabouts remain a mystery. This step has posed challenges in legal jurisdictions, hindering asset recovery efforts. Court hearings, digital subpoenas, and the ongoing cat-and-mouse game have kept the legal and crypto communities on their toes.
The trajectory of 3AC, from its zenith as a $10 billion hedge fund to its unfortunate downfall, is a stark reminder of the volatile crypto market.
The story of its founders, entangled in legal webs across continents, is an eye-opener for aspirants and seasoned players in the crypto world. It stands as a testament that while the digital world might offer unimaginable prospects, it is essential to tread with caution and abide by the regulatory framework of the land.
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