Three Arrows Capital co-founder arrested in Singapore over bankruptcy proceedings issues
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Three Arrows Capital co-founder, Su Zhu, was arrested in Singapore last Friday afternoon while trying to leave the country.
The local authorities made the arrest at Changi Airport, noting that his attempt to leave was what led to his detention. Reports also note that Zhu’s arrest was linked to his failure to cooperate during the bankruptcy proceedings of his company.
Breaking: ZHU Su, co-founder of failed crypto hedge fund Three Arrows Capital, was apprehended at Changi Airport whilst attempting to travel out of Singapore on Friday (Sep 29) afternoon. Businesstimes reported. https://t.co/W01HoeQYCu pic.twitter.com/TwvRuFKbxw
— Wu Blockchain (@WuBlockchain) September 29, 2023
Three Arrows Capital, also known as 3AC, is a crypto-lending company that has developed quite a name for itself over the years. The company became known for major investments into other crypto projects, including LUNA, Aave, BlockFi, Deribit, Avalanche, and even Solana.
Unfortunately, like many other firms, the crypto lender collapsed in 2022, eventually filing for bankruptcy. Its downfall was believed to be a consequence of the Terra (LUNA) collapse, which took place in May 2022. LUNA was a major investment for the company, and its crash brought a devastating blow to 3AC.
Since then, an entity known as Teneo was put in charge of overseeing the liquidation of the failed crypto firm. Teneo was also the entity that confirmed Zhu’s arrest, and the reasons behind it.
The collapse of 3AC
At its peak, 3AC managed around $18 billion in crypto assets. However, in June 2022, the company failed to meet margin calls, which made the public question its financial stability. Furthermore, the company also failed to repay its debt to a crypto broker called Voyager Digital.
The company owed $665 million, and the debt further destabilized the company. Soon after that, the Monetary Authority of Singapore (MAS) got involved, reprimanding the company and its founders during the same month.
The regulator moved after rumors of alleged misinformation emerged, coupled with the firm’s failure to report ownership changes in the executive ranks. 3AC also allegedly exceeded allowable asset thresholds for a fund manager registered in Singapore, according to the local laws.
The MAS launched an investigation which revealed that the firm made false representation about its representatives and that it even failed to notify the regulators about their employment.
3AC co-founders tried to escape responsibility
The behavior of the company and its executives was beyond suspicious at that point, and the entire crypto world took interest, leading to a series of revelations, like the fact that co-founders Kyle Davies and Zhu himself had left on a year-long journey to Bali, instead of dealing with their failing company.
The pair left Singapore, where the firm was headquartered, and started their travel by visiting numerous locations around Asia, essentially taking a sabbatical. In the meantime, the MAS prevented them from participating in Singapore’s financial services sector for the next nine years. This decision was made in September last year.
Today, 3AC is another example of how quickly a crypto company can fail, while its executives suffer the consequences of failing to deal with their business responsibly. While the firm was once a prominent hedge fund known for highly leveraged positions, its collapse resulted in losses exceeding $400 million.
Meanwhile, the bankruptcy of 3AC also contributed further to destabilization of the crypto industry, eventually leading to the collapse of FTX in November 2022.
