In September, Su Zhu, co-founder of the now-defunct Singaporean hedge fund Three Arrows Capital (3AC), was apprehended at Singapore’s Changi International Airport while attempting to flee the country. The arrest came after Singaporean courts issued an arrest warrant for Zhu due to his failure to comply with a court order that required him to cooperate with the liquidator’s investigations. Zhu was sentenced to four months in prison for the breach.
Teneo, the appointed liquidator for 3AC, stated that creditors would seek to engage with Zhu while he is in prison to focus on recovering assets that belong to 3AC or were acquired using 3AC’s funds. The liquidators intend to ensure that Zhu complies with the court order during his imprisonment and thereafter.
Kyle Davies, 3AC’s co-founder, was also sentenced to four months in prison for contempt of court. However, his current whereabouts are unknown as he had reportedly fled to Dubai earlier in the year and opened a restaurant there.
Both Zhu and Davies have been barred from conducting enterprise investment activity in Singapore for nine years by the Monetary Authority of Singapore due to regulatory violations. These violations include exceeding 3AC’s statutory assets under management limit.
Related Post
The bankruptcy of 3AC in July 2022 led to a series of financial losses for the hedge fund’s creditors. The bankruptcy was caused by failed leveraged trades on the Terra ecosystem, which left 3AC without any assets and creditors with over $3.5 billion in claims. The bankruptcy of 3AC also had a ripple effect on its counterparties, such as Celsius, Voyager, and FTX, which also faced bankruptcy.
Prior to the recent developments, 3AC’s creditors had suffered a setback when a U.S. judge halted over a year of bankruptcy proceedings due to a clerical error.
After the collapse of 3AC, both Zhu and Davies pursued alternative entrepreneurial ventures. Davies opened a restaurant in Dubai, while Zhu converted his $36 million luxury property in Singapore into an eco-farm. The farm is managed by Zhu’s wife, Evelyn Tan, through her company Abundant Cities.
In January, Zhu and Davies launched a novel exchange called OPNX, which allowed trading of bankruptcy claims on fallen crypto companies. The platform raised $25 million and had a promising start, with nearly $50 million in daily trading volume by June. However, news of Zhu’s arrest and Davies’ indictment caused the Open Exchange Token to fall nearly 60% in a single day.
OPNX had onboarded tokenized claims of FTX and Celsius, offering users the opportunity to trade crypto futures using collateral in the form of native tokens or credit currency. However, the company’s claims dashboard remains dysfunctional.
In August, all three executives of OPNX, including Zhu and Davies, were fined $2.7 million by Dubai’s Virtual Asset Regulatory Authority for running the exchange without a license.
Despite their other ventures and the success of 3AC Ventures, creditors remain focused on recovering assets and maximizing returns. Teneo, the liquidator for 3AC, has recovered several non-fungible tokens owned by 3AC and auctioned them, generating $13.4 million. The proceedings are ongoing, and creditors are hopeful for further recoveries.
In conclusion, the downfall of 3AC and the subsequent legal actions against its co-founders have had significant implications for the cryptocurrency industry in East Asia. The arrest of Su Zhu and the unknown whereabouts of Kyle Davies, along with the regulatory violations and fines, highlight the challenges faced by hedge funds and exchanges in the region. Creditors continue to fight for the recovery of assets and seek justice for their losses.
