Singapore Bans Founders of Bankrupt Cryptocurrency Hedge Fund
SINGAPORE — The founders of bankrupt cryptocurrency hedge fund Three Arrows Capital — Zhu Su and Kyle Livingston Davies — have been issued nine-year prohibition orders by the Monetary Authority of Singapore (MAS).
Zhu was the CEO and director of Three Arrows Capital while Davies was the chairman and director. Three Arrows Capital was the first major crypto firm to go bankrupt in 2022, brought down by the collapse of cryptocurrencies Luna and TerraUSD. It filed for bankruptcy in the British Virgin Islands in late June that year, according to a Reuters report.
The prohibition orders took effect from Wednesday (Sept 13), MAS said in a news release on Thursday. Zhu and Davies will be prohibited from performing any regulated activity and from taking part in the management of, acting as a director of or becoming a substantial shareholder, of any capital market services firm under the Securities and Futures Act.
MAS had reprimanded Three Arrows Capital in June last year for providing false information and failing to notify the authority about changes to Zhu’s and Davies’ directorship and shareholdings. The company was also found then to have exceeded the assets under management threshold allowed for a registered fund management company, said MAS.
Upon further investigations into Three Arrows Capital, Zhu and Davies, MAS found that the company had committed further violations of the Securities and Futures Act and the Securities and Futures Regulations between August 2020 and January 2022.
- The company had failed to notify MAS within the required timeframe of the employment of a representative.
- Between August 2020 and September 2021, Three Arrows Capital employed Cheong Jun Yoong Arthur to be a portfolio manager, to perform fund management activities on behalf of the company.
- The company also gave MAS false information. In January 2022, it falsely claimed it did not inform MAS about Cheong’s employment because he “did not carry out any regulated activity”.
- Additionally, Three Arrows Capital failed to put in place an appropriate risk management framework to identify, monitor, and address risks associated with the cryptocurrency and digital asset investments under its management.
Responsibility of Directors
As directors of Three Arrows Capital, Zhu and Davies were “primarily responsible” for ensuring that the company complied with regulatory requirements, said MAS. “MAS’ investigation showed that they had failed to discharge their duties and were responsible for Three Arrows Capital’s breaches.”
Action by MAS
Senior management of fund managers are required to implement robust risk management measures to protect the interest of investors, said Ms Loo Siew Yee, MAS’ assistant managing director for policy, payments and financial crime. “MAS takes a serious view of Mr Zhu’s and Mr Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties. MAS will take action to weed out senior managers who commit such misconduct,” she said.