Key Takeaways
- • Singapore's Monetary Authority (MAS) issued nine-year prohibition orders against Three Arrows Capital founders Zhu Su and Kyle Livingston Davies, effective immediately as of September 2023, barring them from managing, directing, or holding substantial shareholdings in any regulated capital market services company in Singapore.
- • The founders are prohibited from conducting any regulated activity under the Securities and Futures Act 2001 and associated regulations, significantly restricting their ability to operate in Singapore's financial services sector.
- • Three Arrows Capital collapsed in June 2022 following the implosion of cryptocurrencies Luna and TerraUSD in May 2022, becoming the first major cryptocurrency hedge fund to file for bankruptcy with creditors claiming total losses of approximately US$3.5 billion (S$4.8 billion).
- • Liquidators are actively seeking to recover approximately US$1.3 billion from Zhu Su and Davies, alleging the founders incurred substantial losses while the fund was already insolvent, with their current whereabouts reported as unknown.
- • MAS cited the founders' failure to establish appropriate risk management frameworks to identify, monitor, and address risks associated with cryptocurrency and digital asset investments, along with prior regulatory breaches including providing false information to the authority.
Summary
Singapore's Monetary Authority has formally banned the two founders of failed cryptocurrency hedge fund Three Arrows Capital from participating in regulated financial services activities for nine years. Zhu Su, chief executive and director, and Kyle Livingston Davies, chairman and director, both 36-year-old Singapore citizens, received prohibition orders effective September 11, 2023. The orders prevent them from managing, acting as directors, or becoming substantial shareholders in any regulated capital market services company operating under Singapore's jurisdiction. Additionally, both are barred from performing any regulated activity under the Securities and Futures Act 2001 (SFA) and related conduct regulations.
Three Arrows Capital emerged as the first major cryptocurrency hedge fund to declare bankruptcy in June 2022, following the catastrophic collapse of Luna and TerraUSD cryptocurrencies in May that year. The fund's implosion created a significant creditor crisis, with claims totaling approximately US$3.5 billion (S$4.8 billion). Court-appointed liquidators are pursuing recovery efforts totaling around US$1.3 billion from Zhu Su and Davies personally, alleging the founders accumulated substantial losses while operating an insolvent entity. Media reports indicate the founders' current whereabouts remain unknown.
The MAS prohibition order follows regulatory action initiated in June 2022 when the authority reprimanded Three Arrows Capital for breaching the SFA and Securities and Futures (Licensing and Conduct of Business) Regulations. The regulator's enforcement action cited the hedge fund's failure to implement adequate risk management frameworks necessary to identify, monitor, and mitigate risks associated with cryptocurrency and digital asset investments. Prior violations included providing false information to MAS and failing to notify the authority of material changes to the founders' roles and responsibilities. The nine-year ban represents a substantial enforcement action reflecting the severity of these regulatory breaches and the scale of investor losses stemming from the fund's operations.
Three Arrows Capital emerged as the first major cryptocurrency hedge fund to declare bankruptcy in June 2022, following the catastrophic collapse of Luna and TerraUSD cryptocurrencies in May that year. The fund's implosion created a significant creditor crisis, with claims totaling approximately US$3.5 billion (S$4.8 billion). Court-appointed liquidators are pursuing recovery efforts totaling around US$1.3 billion from Zhu Su and Davies personally, alleging the founders accumulated substantial losses while operating an insolvent entity. Media reports indicate the founders' current whereabouts remain unknown.
The MAS prohibition order follows regulatory action initiated in June 2022 when the authority reprimanded Three Arrows Capital for breaching the SFA and Securities and Futures (Licensing and Conduct of Business) Regulations. The regulator's enforcement action cited the hedge fund's failure to implement adequate risk management frameworks necessary to identify, monitor, and mitigate risks associated with cryptocurrency and digital asset investments. Prior violations included providing false information to MAS and failing to notify the authority of material changes to the founders' roles and responsibilities. The nine-year ban represents a substantial enforcement action reflecting the severity of these regulatory breaches and the scale of investor losses stemming from the fund's operations.
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