Singapore’s Financial Regulators Ban 3AC Founders

FlavienSeptember 14, 2023

1 minute read

Singapore's Financial Regulators Ban 3AC Founders — Source: Reuters

On September 14, the Monetary Authority of Singapore (MAS) presented an announcement imposing a 9-year prohibition against Zhu Su and Kyle Davies, the founders of the beleaguered crypto hedge fund Three Arrows Capital (3AC). This ban follows the bankruptcy of the fund after the collapse of the Terra ecosystem in May 2022. The founders are now prohibited from taking part in any regulated business activities within the country.

MAS Unravels More Violations Post Reprimand

Following an initial reprimand in June 2022, during which the MAS accused the 3AC founders of providing false information and exceeding the assets under management threshold, further investigations have unearthed additional breaches. These violations, occurring between August 2020 and January 2022, include failing to notify the regulator of the employment of a new portfolio manager within the stipulated timeframe.

3AC Founders’ Failing Risk Management Measures Called Out

Loo Siew Yee, MAS’ assistant managing director, made a damning statement regarding the failures of Su and Davies to implement an effective risk management framework. These shortcomings, coupled with the duo’s false representation of the new manager’s activities and their other transgressions, have led to the MAS’ strict action.

Founders Continue with Crypto Activities Amidst Troubles

In February 2023, despite the ongoing scrutiny and the bankruptcy of 3AC, Zhu and Davies launched a new crypto platform, Open Exchange (OPNX), in Seychelles. This defiant move has not been without repercussions as the Virtual Assets Regulatory Authority (VARA) in Dubai imposed a fine of $2.7 million against OPNX along with fines against Zhu, Davies, and others involved.

The story of 3AC and its founders speaks volumes about the importance of regulatory compliance in the increasingly scrutinized world of crypto hedge funds. The MAS’s rigorous action underlines the need for robust and transparent risk management frameworks and emphasizes the importance held by the regulatory body for the protection of investors’ interests. As more countries tighten regulatory procedures around cryptocurrency, failure to comply could result in harsh consequences, as is evident from the case of the 3AC founders.

Key Points

Who has been banned by the Monetary Authority of Singapore (MAS)?

The MAS has banned Zhu Su and Kyle Davies, founders of the now-bankrupt crypto hedge fund 3AC, from engaging in regulated business activities for nine years.

What violations led to the ban?

The ban followed a series of violations including providing false information, failing to disclose the employment of key personnel, and having a deficient risk management framework.

What have the founders been up to following their ban and the bankruptcy of 3AC?

Despite their troubles, Zhu and Davies have launched a new crypto platform, Open Exchange (OPNX), which has recently been fined $2.7 million by the Dubai’s Virtual Assets Regulatory Authority (VARA).