3AC Co-Founder Su Zhu Arrested in Singapore

On Friday, police arrested 3 Arrows Capital co-founder Su Zhu at Singapore’s Changi Airport.

The hedge fund had filed for bankruptcy last year after suffering significant losses due to a massive sell-off of assets amid a downturn in crypto markets. The liquidator, Teneo, revealed that Zhu was detained while attempting to leave the city-state, following a committal order issued by Singapore Courts for his failure to comply with the investigation into the company's failure.

Zhu's arrest is part of a legal saga that includes his co-founder, Kyle Davies, who was also committed to four months in prison. However, Davies' whereabouts remain unknown. The Monetary Authority of Singapore had previously banned both Zhu and Davies from conducting regulated investment activity for nine years each.

The liquidator, appointed by a court in the British Virgin Islands, is working to recover the assets of Three Arrows and bring returns to its creditors. Teneo accused Zhu and Davies of not cooperating with the efforts to return funds and failing to voluntarily provide information.

Three Arrows Capital, once managing around $10 billion in assets, filed for bankruptcy in 2022 after incurring heavy losses from the collapse of the cryptocurrency Luna and stablecoin TerraUSD. The fund faced scrutiny for providing false information to regulatory authorities, failure to notify changes in directorship and shareholdings, and exceeding the allowed assets-under-management threshold.

The committal order against Zhu was granted on September 25, citing his "deliberate failure" to comply with the court order, and he was sentenced to four months in prison. During his imprisonment, the liquidators plan to engage with Zhu on matters related to Three Arrows, focusing on the recovery of assets acquired using the fund's funds. The liquidators aim to ensure Zhu's compliance with the court order and may seek further court orders as required.

Zhu's arrest adds to a series of high-profile detentions of cryptocurrency industry figures following the collapse of businesses and fraud scandals, contributing to the decline in cryptocurrency prices. Other notable arrests include Sam Bankman-Fried of FTX exchange, Alex Mashinsky of Celsius Network, and Do Kwon of Terraform Labs.

Three Arrows' co-founders, Zhu and Davies, had previously denied wrongdoing and, after the collapse of the hedge fund, engaged in travel and launched a new venture called Open Exchange, an online platform for trading crypto company bankruptcy claims. Since Zhu’s arrest, the price of the company’s token has crashed more than 30 per cent. The arrest comes amid increased regulatory scrutiny and legal actions within the cryptocurrency industry.