Singapore Central Bank Bans 3AC Founders Zhu Su and Kyle Davies Over Securities Law Violations

Singapore’s Monetary Authority (MAS) has imposed a nine-year ban on Zhu Su and Kyle Davies, the founders of the now-defunct crypto hedge fund Three Arrows Capital (3AC), for their alleged breaches of the country’s securities laws.

The MAS announced this decision in a statement published on September 14, 2023. This ban effectively prevents the 3AC founders from participating in regulated financial activities in Singapore.

According to the MAS statement:

“Under the prohibition orders (POs), which took effect on September 13, 2023, Mr. Zhu and Mr. Davies are barred from engaging in any regulated activity and from assuming management positions, directorships, or substantial shareholdings in any capital market services firm under the Securities and Futures Act (SFA).”

Three Arrows Capital (3AC), once one of the largest hedge funds in the cryptocurrency industry, declared bankruptcy in 2022 after it struggled to manage the fallout of the collapse of the Terra ecosystem in May of the same year.

In its statement, MAS noted after it reprimanded 3AC in 2022 for failing to disclose Su’s and Davies’ directorial roles and exceeding the assets-under-management threshold requirements, it began to conduct further investigations into hedge fund operations.

This further investigation uncovered additional breaches of securities laws by 3AC between August 2020 and January 2022. These violations included the hedge fund’s failure to promptly notify the MAS of the hiring of Cheong Jun Yoong Arthur as a portfolio manager, along with falsely representing Mr. Cheong’s management activities. Furthermore, the regulator alleged that 3AC lacked a suitable risk management framework to safeguard the digital assets entrusted to its care.

The MAS declared that it holds the co-founders Su and Davies responsible for the company’s violations and failing to discharge their duties.

Loo Siew Yee, MAS’ assistant managing director, was quoted in the statement, saying:

“Senior management of fund managers are required to implement robust risk management measures to protect the interest of investors. MAS takes a serious view of Mr Zhu’s and Mr Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties. MAS will take action to weed out senior managers who commit such misconduct.”