Three Arrows Capital co-founder Su Zhu arrested in Singapore, faces 4 months in jail
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(Kitco News) - The executives behind the biggest implosions in the crypto ecosystem in 2022 continue to face legal consequences as Su Zhu, co-founder of the bankrupt crypto hedge fund Three Arrows Capital (3AC), has been arrested in Singapore while attempting to leave the country.
According to a statement from Teneo, the joint liquidator overseeing the 3AC bankruptcy, Zhu “was apprehended at Changi Airport whilst attempting to travel out of Singapore following a committal order granted by the Singapore Courts against him.“
Teneo was granted a committal order – which is used to send someone to prison for contempt of court – in a Singapore court on Sept. 25 after the court agreed with the firm’s claim that Zhu failed to comply with a court order.
Prior to its collapse in 2022 due to overexposure to the now-defunct Terra/Luna ecosystem, 3AC was one of the largest hedge funds in the crypto industry, with $10 billion in assets under management.
Unfortunately for the firm, co-founders Zhu and Kyle Davies had opened excessive leverage and long positions across some cryptocurrencies and borrowed hundreds of millions of dollars from crypto lending protocols.
Once Terra collapsed due to the de-pegging of the TerraUSD (UST) stablecoin, the bills came due for 3AC, but without the funds to cover their losses, the firm ultimately filed for bankruptcy. This set off a cascade of bankruptcies for multiple crypto lending protocols and firms, including Celsius, BlockFi, and Voyager Digital.
Since that time, Zhu and Davies have been on the lam, concealing their whereabouts from both liquidators and law enforcement despite remaining active on social media and even launching another crypto platform.
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The committal orders granted in Singapore sentenced Zhu and Davies to four months in prison, according to Teneo.
“As a result, Mr. Zhu will be held in prison to serve his sentence of 4 months under the committal order, during which time the liquidators will seek to engage with him on matters relating to 3AC, focusing on the recovery of assets that are either the property of 3AC or that have been acquired using 3AC’s funds,” Teneo said. “The liquidators will pursue all opportunities to ensure Mr. Zhu complies in full with the court order made against him for provision of information and documents relating to 3AC and its former investment manager during the course of his imprisonment and thereafter, and may make applications for further court orders as required.“
Davies’ whereabouts are currently unknown.
Earlier in September, the Monetary Authority of Singapore (MAS) issued a nine-year market activity ban against Zhu and Davies, which went into effect on September 13, after determining they misled the regulator and committed multiple violations between August 2020 and January 2022.
“MAS takes a serious view of Mr. Zhu’s and Mr. Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties,” said Loo Siew Yee, assistant managing director of payments and financial crime at the regulator. “MAS will take action to weed out senior managers who commit such misconduct.”