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Three Arrows Capital Co-Founder Su Zhu Arrested in Singapore — Davies Remains Absconded

Published October 2, 2023 9:53 AM
Teuta Franjkovic
Published October 2, 2023 9:53 AM

Key Takeaways

  • Su Zhu, co-founder of Three Arrows Capital, has been captured by law enforcement.
  • According to the liquidators in charge, authorities detained Zhu at Changi Airport in Singapore as he was ostensibly attempting to flee.
  • According to Teneo, which manages 3AC’s liquidation, Zhu and his co-founder, Kyle Davies, have both received four-month prison terms.

Su Zhu, co-founder of the insolvent digital asset hedge firm Three Arrows Capital, was apprehended by law enforcement after it appeared that he was trying to leave Singapore.

Zhu was detained  at Changi Airport in Singapore after having attempted to leave the city-state, according to liquidators managing the bankruptcy estate of the failed fund.

According to Teneo, the financial consultancy company managing 3AC’s liquidation, Zhu and co-founder Kyle Davies have each received a four-month prison term. It is not know n where Davies is right now.

The court found Zhu guilty of willfully disobeying court orders that required him to assist Teneo in its investigation of creditors’ claims and the collapse of the multibillion-dollar fund.

Risky Trading Approach Results in Bankruptcy

One of the most well-known cryptocurrency hedge funds in the world at its height in 2022, 3AC handled around $10 billion in assets. The company declared bankruptcy  in the middle of 2022 after a particularly hazardous trading strategy and the collapse in cryptocurrency prices combined to wipe away all of its assets and render it unable to pay back its lenders. A wave of bankruptcies spread throughout the industry after 3AC’s bankruptcy because of its extensive list of counterparties.

The court has issued a similar committal order for Davies, who is still at large. Police instructions require the apprehension and safe custody of Davies to serve his four-month term.

While Zhu is in custody, Teneo commits to collaborating with him on 3AC-related matters, with a focus on recovering assets belonging to 3AC or acquired using 3AC’s funds. The company has indicated that it may seek further court orders against him.

The recovery of 3AC’s assets and optimising returns for its creditors have always been the liquidators’ top priorities, according to a written statement from Teneo.

According to reports, Davies and Zhu were looking for investors in January  for a new project — a distressed debt marketplace called GTX that planned to profit from industry bankruptcies.

The Monetary Authority of Singapore, responsible for overseeing investment activities, has prohibited the co-founders from participating in regulated investment activities for nine years, as reported by Teneo.

OX Token Drops After Zhu’s Arrest

Following the announcement of co-founder Su Zhu’s arrest on Friday, the price of Open Exchange’s OX token  dropped as much as 50%; at the time of writing, it had decreased by 11.45%.

Limited liquidity for the asset is responsible for some of the decline’s severity. A single Uniswap v3 pool dominates nearly 97% of the $5.88 million daily volume, surpassing the pool’s $1.3 million liquidity by a ratio of four.

OX presently has a market valuation of $34.9 million.

To facilitate the trading of cryptocurrency bankruptcy claims for companies like Celsius, FTX, and 3AC, they established the OX project as an exchange. This looks like a pivotal component of Kyle Davies and Zhu’s efforts toward public rehabilitation.

Zhu and Davies frequently made hints that the failure of 3AC was more a result of bad market bets than of fraud or illegal activity. Their larger effort to restore themselves in the cryptocurrency business included Open Exchange.

Significant Number of Crypto Figures Behind Bars

Zhu’s arrest is the most recent in a series of actions that have led to the imprisonment of a sizable number of crypto’s most well-known figures.

Authorities detained Do Kwon, the individual responsible for the once-popular cryptocurrency project Luna, which saw its value plummet to zero last year. He faced apprehension in Montenegro in March when attempting to board a private plane using a fraudulent passport.

The co-founder of BitMEX, Arthur Hayes , completed a six-month house detention in Miami earlier this year.

Sam Bankman-Fried, the former CEO of FTX, who had been under house arrest since late last year, now finds himself behind bars. Judges have withdrawn his bail in advance of a significant fraud trial which will start next week.

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