In a shocking development that has sent ripples through the cryptocurrency world, Su Zhu, one of the co-founders of the now-defunct crypto hedge fund Three Arrows Capital, has been handed a four-month prison sentence for his failure to cooperate with investigations into the fund’s devastating collapse. This announcement was made public by the liquidator overseeing the fund’s dissolution, marking a pivotal moment in the cryptocurrency landscape.
Su Zhu’s arrest unfolded at Singapore’s Changi airport earlier in the day, just as he attempted to leave the country. This dramatic event followed a court order obtained earlier in the week by Teneo, the advisory firm tasked with overseeing the liquidation process, which mandated his committal to prison.
Meanwhile, the whereabouts of Kyle Davies, Su Zhu’s co-founder at Three Arrows Capital, remain shrouded in mystery, as Teneo confirmed that he, too, has been sentenced to a four-month prison term.
The detention of Su Zhu caps a year-long quest to locate the leaders of the crypto fund, whose cataclysmic collapse last year triggered a seismic drop in cryptocurrency prices and resulted in the downfall of numerous cryptocurrency firms.
Three Arrows Capital, a prominent figure in the crypto market based in Singapore, had leveraged substantial borrowing to amplify its positions before facing devastating losses in June of the preceding year.
Court appoints Teneo to oversee liquidation of the fund’s holding.
Teneo, appointed by a court order in the British Virgin Islands to oversee the liquidation of the fund’s holdings, encountered formidable challenges in securing cooperation from Su Zhu and Kyle Davies.
Earlier this year, Teneo secured a Singapore court order compelling Su Zhu to collaborate fully in the investigation, citing the founders’ persistent unavailability and their failure to voluntarily provide essential information.
Teneo disclosed on Friday that the committal order against Su Zhu was granted by the Singapore court due to his deliberate failure to comply with the liquidators and to provide a thorough account of his actions as one of the founders of Three Arrows Capital.
Back in June, Su Zhu and Kyle Davies divulged to the New York Times that they had spent their time in the aftermath of the fund’s collapse traveling to various destinations, including Bali, engaging in meditation, and even surfing.
Adding to the intrigue, the duo announced plans in January to raise $25 million for a new cryptocurrency exchange that would specialize in trading bankruptcy claims, following the collapse of FTX. Teneo was particularly critical of Kyle Davies, accusing him of pursuing fundraising efforts “shamelessly” while evading his obligations to the failed company.
The prison sentence will see Su Zhu serving four months behind bars. During this time, liquidators plan to engage with him regarding matters connected to Three Arrows Capital, with a significant focus on the recovery of assets either owned by the fund or acquired using its funds, as detailed by Teneo.
At present, there has been no official statement from the Singapore police regarding the case.
It’s important to note that Three Arrows Capital carries a debt exceeding $3 billion to creditors, a list that includes the now-defunct brokerage firm Genesis and the cryptocurrency exchange Blockchain.com.
Earlier this month, the Monetary Authority of Singapore took a drastic step by banning both disgraced founders from participating in the financial sector for a staggering nine years. This move followed Singapore’s reprimand of Three Arrows last year for providing false information and breaching asset management thresholds.
The collapse of Three Arrows Capital had a cascading effect throughout the cryptocurrency industry. It resulted in a sharp decline in token prices and triggered a wave of challenges for various industry players, including Voyager, BlockFi, and Genesis. Investors were forced to confront the risks associated with highly leveraged bets within the crypto sphere.
The saga surrounding Su Zhu’s prison sentence is undoubtedly a development that will continue to reverberate throughout the cryptocurrency world. As this unfolding story unfolds, it serves as a stark reminder of the importance of accountability and transparency in a rapidly evolving and dynamic industry. While the specifics of the case continue to unravel, the broader cryptocurrency community remains vigilant, hoping to glean lessons from this high-profile incident.
