The MAS has also banned them from managing, acting as a director, or even being a substantial shareholder of any capital market services business operating in Singapore.
In the latest development, the central bank of Singapore has issued nine years of prohibitions to the founders of Three Arrows Capital Kyle Davies and Su Zhu over the alleged violations of the country’s securities laws.
On Thursday, September 14, the Monetary Authority of Singapore (MAS) said in a statement that Davies and Zhu have been banned from regulated activities during the prohibition period, starting September 13.
Furthermore, the MAS has also banned them from managing, acting as a director, or even being a substantial shareholder of any capital market services business operating in Singapore. In its ruling to disqualify both individuals, MAS stated that it uncovered additional violations of securities laws during its extended investigation into the bankrupt company 3AC and its co-founders.
MAS asserted that Su and Davies did not inform the central bank about 3AC’s appointment of a new business representative, and provided misleading information to the regulatory body. Besides, they did not establish an adequate risk management framework as required by regulations.
Speaking on the development, Loo Siew Yee, MAS’ assistant managing director of policy, payments and financial crime, said:
“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.”
Three Arrows Capital Insolvency and Comeback
In June of the previous year, just before 3AC filed for bankruptcy and amidst widespread reports of financial instability, MAS had officially reprimanded the hedge fund. This reprimand was based on several key issues, including the provision of false information to the regulatory body, failure to report changes in directorship involving Zhu and Davies, and surpassing the legally permissible assets under management limit.
The downfall of 3AC occurred during the crypto market crash in the same year, which was triggered by the Terra ecosystem’s collapse. This event exposed 3AC to substantial losses due to its leveraged crypto positions, ultimately leading to billions in loan defaults.
Creditors have asserted that 3AC has outstanding debts amounting to as much as $3.5 billion. Liquidators are actively pursuing the recovery of approximately $1.3 billion from Zhu and Davies, who allegedly incurred this debt while the company was already insolvent.
Earlier this year in June, the founders of Three Arrows Capital launched their new crypto exchange OPNX which will allow users to trade claims of a bankrupt crypto company. Additionally, the founders also unveiled a new VC fund. The goal of the new VC fund is to invest in the crypto exchange OPNX.