Co-founder of Three Arrows Capital, Su Zhu, has been arrested and may face 4 months of imprisonment, while co-founder Kyle Davies is still missing.

Su Zhu, co-founder of Three Arrows Capital, has been arrested and may face 4 months in prison, while co-founder Kyle Davies remains missing.

Author: FX168 Financial News Agency

On Friday, September 29th, Su Zhu, the co-founder of bankrupt crypto hedge fund Three Arrows Capital (3AC), was arrested in Singapore while attempting to leave the country. The executives behind the most severe implosion in the 2022 crypto ecosystem continue to face legal consequences.

According to a statement from Teneo, the joint liquidator overseeing the 3AC bankruptcy case, Su Zhu “was arrested at Changi Airport in Singapore while attempting to leave the country after a detention order was issued against him by the Singapore court.”

On September 25th, Teneo obtained a detention order after a Singapore court agreed with the company’s claim that Su Zhu had failed to comply with a court order. This order is used to imprison someone for contempt of court.

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Prior to its collapse in 2022 due to overinvestment in the now-dissolved Terra/Luna ecosystem, 3AC was one of the largest crypto hedge funds in the industry, managing $10 billion in assets.

Unfortunately for the company, co-founders Su Zhu and Kyle Davies had taken on excessive leverage and long positions on certain cryptocurrencies, borrowing hundreds of millions of dollars from crypto lending protocols.

Once Terra collapsed due to the decoupling of the TerraUSD (UST) stablecoin, 3AC’s bills came due, but with no funds to cover the losses, the company eventually filed for bankruptcy. This triggered a series of bankruptcies for multiple crypto lending protocols and companies, including Celsius, BlockFi, and Voyager Digital.

Since then, Su Zhu and Kyle Davies have been in hiding, although they have remained active on social media and even launched another crypto platform, concealing their whereabouts from liquidators and law enforcement agencies.

According to Teneo, the detention order issued in Singapore sentenced Su Zhu and Kyle Davies to four months of imprisonment.

“Su Zhu will be incarcerated in prison and serve a four-month sentence according to the detention order. During this period, the liquidator will seek to engage with him regarding matters related to 3AC, with a focus on the recovery of the following assets: assets owned by 3AC or acquired using 3AC funds.”

Teneo stated: “The liquidator will seek all opportunities to ensure that Su Zhu fully complies with the court’s orders in relation to providing information and documents concerning 3AC and its former investment manager during and after his imprisonment, and will apply for further court orders as necessary.”

Kyle Davies is currently missing.

In early September, the Monetary Authority of Singapore (MAS) found that Su Zhu and Kyle Davies had misled regulatory authorities and committed multiple breaches of regulations from August 2020 to January 2022, and issued them a nine-year prohibition order on market activities, which took effect on September 13th.

Loo Siew Yee, Assistant Managing Director of the Monetary Authority of Singapore responsible for payments and financial crime, said, “MAS takes a serious view of Su Zhu and Kyle Davies’ blatant disregard for MAS regulatory requirements and their dereliction of duty. MAS will take action to bring senior executives who engage in such misconduct to justice.”

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