The Monetary Authority of Singapore (MAS) has issued a sweeping ban, lasting nine years, against the founders of the ill-fated cryptocurrency hedge fund, Three Arrows Capital. This ban, effective immediately, bars Mr. Zhu Su and Mr. Kyle Livingston Davies, both 36-year-old Singaporean citizens, from participating in the management, acting as directors, or becoming substantial shareholders of any regulated capital market services company within Singapore.
When approached for a statement regarding the ban, Mr. Zhu declined to comment.
In addition to these restrictions, the ban also encompasses any involvement in regulated activities governed by the Securities and Futures Act 2001 (SFA), according to an announcement made by MAS on Thursday.
This decision comes after more than a year has passed since MAS reprimanded Three Arrows in June 2022 for breaching the SFA and the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).
Mr. Zhu held the positions of chief executive and director within the crypto hedge fund, while Mr. Davies served as chairman and director. As reported in the media, their current whereabouts remain unknown.
Creditors claim that Three Arrows Capital owes an astonishing sum of up to US$3.5 billion (S$4.8 billion), with liquidators diligently pursuing the recovery of approximately US$1.3 billion from Mr. Zhu and Mr. Davies. These losses are alleged to have been incurred while the company was already insolvent.
MAS, in its official statement on Thursday, criticized the company for failing to establish an adequate risk management framework to identify, monitor, and mitigate risks linked to cryptocurrency and digital asset investments under its purview.
In their roles as directors of Three Arrows, Mr. Zhu and Mr. Davies bore the primary responsibility of ensuring the fund’s compliance with regulatory requirements under the SFA and SFR. Regrettably, they failed to fulfill their duties, resulting in the company’s multiple breaches, as outlined by MAS.
Ms. Loo Siew Yee, Assistant Managing Director for Policy, Payments, and Financial Crime at MAS, stated, “Senior management of fund managers are required to implement robust risk management measures to protect the interests of investors. MAS takes a serious view of Mr. Zhu’s and Mr. Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties.”
She further emphasized, “MAS will take action to weed out senior managers who commit such misconduct.”
Furthermore, the regulatory body noted that Three Arrows had provided false information in January 2022 regarding the employment of Mr. Arthur Cheong Jun Yoong. He had been involved in fund management activities on behalf of the company between August 2020 and September 2021.
Additionally, Three Arrows failed to inform MAS of Mr. Cheong’s hiring during that period as a portfolio manager responsible for fund management activities on behalf of the company, thus breaching the SFR.
Established in 2012 by Mr. Zhu and Mr. Davies, who were school and university peers and had previously worked as traders at Credit Suisse, Three Arrows once boasted assets under management exceeding US$4 billion at its peak.
In collaboration with others, they embarked on a comeback journey at the outset of 2023, introducing a new cryptocurrency exchange named OPNX, only six months after Three Arrows’ collapse and two months following the infamous downfall of Sam Bankman-Fried’s cryptocurrency exchange, FTX.
In April, Dubai authorities rebuked the duo for operating and promoting OPNX without the necessary local license. Reports in mid-August revealed that Dubai’s crypto regulator imposed fines on the two founders, as well as OPNX co-founder Mark Lamb and his wife, Leslie Lamb, who serves as the company CEO, for violations of marketing regulations.
The Virtual Assets Regulatory Authority reportedly fined OPNX US$2.7 million in May, a penalty that remains unpaid. Additionally, fines totaling approximately US$54,500 were levied against Mr. Zhu, Mr. Davies, and the Lambs for breaching marketing rules, and these fines have already been settled.