The arrest of Su Zhu, the co-founder of Three Arrows Capital, in Singapore on Friday marks a significant downturn in the fortunes of one of the formerly prominent figures in the world of cryptocurrencies.
Once recognized as one of the largest and most successful crypto-native hedge funds, Three Arrows Capital faced a substantial setback in 2022 due to significant losses resulting from ill-fated investments in Luna tokens and other assets. This downturn led to Zhu and his co-founder, Kyle Davies, going into hiding, leaving creditors with approximately $3 billion in unpaid debts.
After an extended period of absence from social media and widespread speculation about their whereabouts, Zhu and Davies eventually resurfaced in Dubai. They claimed to be involved in the launch of OPNX, a platform for tokenized versions of bankruptcy claims, including those linked to the bankrupt crypto exchange FTX. On Twitter, Zhu and Davies began posting photos and conducting media interviews from various destinations, including Thailand, Bali, Spain, and Malaysia.
During this time, Zhu and Davies were engaged in a lengthy dispute with Teneo, the firm appointed to unwind Three Arrows. Each side accused the other of failing to cooperate. Teneo stated in a February filing that the founders had not provided forthright cooperation, and accused Davies of ignoring court directives and enjoying media attention while obstructing the liquidators' efforts to access documents and information.
Conversely, Zhu and Davies accused Teneo of not engaging constructively to return funds to creditors. The recent arrest of Su Zhu, who had previously expressed concerns about going to jail, occurred at Changi Airport in Singapore as he attempted to leave the country without complying with a court order compelling him to cooperate with Teneo. The firm reported that both Zhu and Davies were sentenced to four months in prison via a committal order. Teneo seeks to recover over $1 billion directly from the two individuals. As of now, neither Zhu nor Davies has responded to requests for comment.
Singapore's financial regulator had previously banned the pair from engaging in regulated activities in the city-state for nine years, and Davies' current whereabouts are unknown, with no response from his lawyers. Bloomberg News has reached out to Singapore police for comments.
Su Zhu's arrest adds to a series of legal actions taken against alleged misconduct in the cryptocurrency sector. These actions follow a string of high-profile business failures and fraud scandals that resulted in the loss of trillions of dollars in market value in the previous year.
In the United States, where there has been a comprehensive crackdown on cryptocurrencies at both the federal and state levels, authorities have been investigating whether Three Arrows misled investors and failed to register with local agencies, as reported by Bloomberg News in October.
Teneo has indicated its intention to engage with Su Zhu regarding matters related to Three Arrows and the recovery of lost funds during his incarceration. The estate has been steadily auctioning and selling Three Arrows' assets to generate funds for creditors, including an attempted $30 million sale of the co-founders' super-yacht, known as "Much Wow."
Inspirer by: Emily Nicolle at Bloomberg