Tuesday, July 16, 2024

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    3AC’s Su Zhu was sentenced to four months in prison after trying to flee Singapore

    Su Zhu, the disgraced co-founder of defunct ‘crypto’ hedge fund Three Arrows Capital (3AC), has been jailed for four months after being arrested by Singaporean authorities at the local airport.

    The court-appointed liquidator leading 3AC’s messy autopsy — announced that Su Zhu “was arrested at Changi Airport while attempting to depart Singapore following a detention order issued against him by the Singapore court.”

    On September 25, Teneo obtained this surrender order “as a result of (Zhu’s) willful disregard” of a separate court order. The order forced Zhu to “cooperate with the liquidator’s investigation and answer for his activities” as one of the architects of 3AC’s downfall.

    The surrender warrant, which covered both Zhu and 3AC’s other co-founder, Kyle Davies, authorized any law enforcement officer to arrest them on the spot and “bring them safely to prison for 4 months”. Davies’ whereabouts are currently unknown, although he continues to appear on social media.

    While Zhu enjoys Singaporean prison food – and, hopefully, some one-sided conversations with an amorous cellmate – Teneo will continue to press him on where he and Davies may have siphoned off some of the assets they ‘earned’ from their fraudulent activities. Teneo warned that it “will apply for further court orders as necessary”.

    3AC, which at its peak had more than $10 billion in assets under management, collapsed in May 2022 after the crypto card house it was built on began to falter. 3AC has invested around $600 million in UST, an algorithmic stablecoin/hand-wavey-bullshit token issued by Terraform Labs. When the UST lost its peg to the US dollar, it set in motion a cascade of insolvencies that continue to plague the digital asset sector today.

    Among the most prominent victims of 3AC was Genesis Global Capital, which even after liquidating the collateral provided by 3AC was left with a $1.2 billion hole. Barry Silbert’s Digital Currency Group (Genesis’ parent company) tried to cover up this deficit with a $1.2 billion ‘promissory note’ due in 2032, a ploy that outside observers called a worthless IOU.

    Voyager Digital owed less ($685 million), but beat Genesis in bankruptcy court within six months. Blockchain.com took third place with a $300 million wound, while countless other companies suffered ‘only’ eight-figure losses.

    Despite the masses of retail ‘investors’ who lost significant sums as a result of the 3AC collapse and the resulting contagion, neither Zhu nor Davies have shown anything resembling remorse for their actions to date. Indeed, Zhu’s refusal to cooperate with the 3AC liquidators and this latest attempt to go on the run only underscore his unwillingness to accept responsibility for his crimes.

    The actions of 3AC insiders prior to its demise vividly illustrate this malignant narcissistic narrative. Various tokens worth tens of millions of dollars were transferred to friends and family in the dying days of 3AC, even as 3AC took on even more debt that its founders realized they would never be able to repay. Before that, there were luxury purchases, including a $50 million yacht and two villas in Singapore worth a total of $54 million.

    In February, even as duped customers clamored for Zhu and Davies’ blood, the two announced a new Dubai-based crypto project called Open Exchange (OPNX) that quickly raised $25 million and launched in April. However, after failing to obtain a local license, Dubai regulators quickly fined OPNX $2.7 million, a blow across the bow that Zhu and Davies (surprise!) continued to ignore.

    The Monetary Authority of Singapore recently took the long-awaited step of banning Zhu and Davies from acting in any capacity in any area under the city-state’s Securities and Exchange Act for nine years. Sincerely, this was far too little, far too late. Jailing Zhu is a good start, but if he continues to refuse to cooperate, throw away the fucking spanner.

    Zhu and Davies appear to share the same carefree attitude as Sam Bankman-Fried (SBF), the equally disgraced founder of the failed FTX exchange. SBF’s criminal trial for fraud and money laundering begins on October 3, but his actions and statements so far show no sign that he realizes how seriously his duplicity has hurt FTX’s regular customers.

    SBF seems to believe that the rules don’t apply to him, that he’s above the law, that he never intended to hurt anyone, but if he did, he’s very, very sorry. If you show him or Zhu or any other crypto scammer any sympathy and dismiss them with a slap on the wrist, they will go right back to the same scam. Hit them hard enough that they don’t get up. That’s the only way to learn.

    Follow CoinGeek’s Crypto Crime Cartel series, which delves into the flow of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
    Ethereum, FTX, and Tether—which have co-opted the digital asset revolution and turned the industry into a minefield for naive (and even seasoned) market players.


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