The recent arrest of Su Zhu, a crypto fugitive and co-founder of the now-defunct digital asset hedge fund Three Arrows Capital, has sent shockwaves through the cryptocurrency industry. Zhu was apprehended while attempting to flee Singapore, as disclosed by the liquidators overseeing the bankruptcy estate of the collapsed fund, known as 3AC.
Four-Month Prison Sentence: Zhu and Co-Founder Kyle Davies Facing Legal Consequences
In a statement released on Friday, Teneo, the financial advisory firm handling 3AC’s liquidation, revealed that both Su Zhu and his co-founder, Kyle Davies, have been sentenced to four months in prison. However, the current whereabouts of Kyle Davies remains unknown, adding an air of mystery to the unfolding saga.
The legal action against Zhu stems from a ruling by the Singapore Courts, which found him deliberately non-compliant with court orders mandating cooperation with Teneo’s investigation into creditors’ claims and the unraveling of the multibillion-dollar fund.
3AC’s Rise and Fall: From $10 Billion to Bankruptcy
At its zenith in 2022, 3AC managed an impressive $10 billion in assets, cementing its position as one of the foremost crypto hedge funds globally. However, the fund succumbed to the volatile nature of the cryptocurrency market in mid-2022. A risky trading strategy, coupled with the significant drop in cryptocurrency prices, resulted in the depletion of 3AC’s assets, leaving it unable to meet its financial obligations and triggering a wave of bankruptcies across the sector.
While Su Zhu is now in custody, Teneo has expressed its intent to collaborate with him on matters concerning 3AC. The focus will be on recovering assets that either belong to the fund or were acquired using its funds. Teneo has also indicated the possibility of seeking additional court orders against Zhu, suggesting that legal proceedings are far from concluded.
In the meantime, Kyle Davies, the other co-founder, remains at large. Authorities have issued a committal order from the court, directing the police to apprehend Davies safely so that he can serve his four-month sentence. The unfolding drama adds a layer of intrigue, as the crypto community eagerly awaits further developments.
Priority on Asset Recovery: Teneo’s Commitment to Creditors and Financial Restitution
Teneo emphasized that the primary goal throughout the entire process has been the recovery of 3AC’s assets and the maximization of returns for its creditors. In response to the arrest, Teneo released a statement saying, “The liquidators’ priority has been recovering the assets of 3AC and maximizing returns for its creditors,” underscoring the commitment to financial restitution.
Adding complexity to the narrative, reports surfaced in January suggesting that Davies and Zhu were actively seeking investors for a new venture. This venture, named GTX, aimed to establish a distressed debt marketplace capitalizing on the aftermath of industry bankruptcies.
Regulatory Response: Nine-Year Ban on Regulated Investment Activities by Monetary Authority of Singapore
Furthermore, the Monetary Authority of Singapore, responsible for regulating investment activities, has taken a strict stance. It has barred both co-founders from engaging in regulated investment activity for a lengthy period of nine years, underscoring the gravity of their actions in the eyes of financial regulatory authorities.
The arrest and subsequent legal actions against Zhu and Davies are sure to reverberate through the cryptocurrency landscape, prompting renewed discussions about the need for robust regulatory frameworks in this rapidly evolving industry.
