Tuesday, June 18, 2024

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    Crypto Hedge Fund Co-Founder Su Zhu Imprisoned Amidst Investigation into Three Arrows Capital’s Collapse

    Su Zhu, Co-Founder of Three Arrows Capital, Incarcerated as Crypto Fund's Troubles Unfold

    In a startling development, Su Zhu, one of the co-founders of the now-collapsed crypto hedge fund, Three Arrows Capital, has been sentenced to four months in prison due to his non-cooperation with investigations into the fund’s demise. This momentous decision comes as a culmination of a year-long pursuit to locate the individuals responsible for the crypto fund’s downfall, which initiated a significant decline in cryptocurrency prices and the subsequent collapse of several associated companies.

    The arrest occurred at Singapore’s Changi Airport, where Su Zhu was apprehended while attempting to leave the country. Teneo, an advisory firm overseeing the liquidation process, confirmed that they had obtained a court order for his committal to prison earlier in the week.

    Remarkably, Kyle Davies, the other co-founder of Three Arrows Capital, has also been sentenced to four months in prison. However, his current whereabouts remain undisclosed, raising further intrigue in this unfolding saga.

    Three Arrows Capital, a Singapore-based hedge fund, once played a prominent role in crypto markets by leveraging substantial positions through heavy borrowing. However, last June, their bets took a disastrous turn, leading to the fund’s collapse.

    The British Virgin Islands court appointed Teneo to liquidate the fund’s holdings. Yet, Zhu and Davies have repeatedly failed to cooperate with the liquidators, frustrating the investigation’s progress. Earlier this year, a Singapore court ordered Zhu to assist in the investigation, emphasizing that the founders had not made themselves available and had not voluntarily provided crucial information.

    In response to Su Zhu’s ongoing non-compliance, Teneo secured the committal order from the Singapore court, describing it as a consequence of Zhu’s deliberate failure to cooperate and account for his actions as one of the founders of Three Arrows Capital.

    In a baffling turn of events, Zhu and Davies revealed in June that they had spent their time traveling, including visits to Bali, meditation retreats, and surfing. Furthermore, they announced plans in January to raise $25 million for a new crypto exchange that would trade bankruptcy claims following the failure of FTX. Teneo criticized Davies’s fundraising efforts, labeling them as shameless while he evaded his responsibilities to the failed company.

    With Su Zhu’s imprisonment, the liquidators intend to engage with him regarding matters related to Three Arrows Capital, with a primary focus on recovering assets belonging to the fund or acquired using its funds.

    The Monetary Authority of Singapore dealt another blow to the disgraced founders earlier this month by banning them from participating in the financial sector for nine years. This action follows Singapore’s reprimand of Three Arrows for providing false information and breaching asset management thresholds in the previous year.

    The collapse of Three Arrows Capital had far-reaching consequences, causing token prices to plummet and sparking concerns about highly leveraged bets within the crypto industry. Notably, the fund owes over $3 billion to creditors, including collapsed broker Genesis and exchange Blockchain.com.

    As this investigation continues to unfold, it casts a shadow on the crypto world and serves as a stark reminder of the importance of transparency and accountability within the industry.

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