In a shocking turn of events, Su Zhu, the co-founder of Three Arrows Capital (3AC), a once prominent Singaporean hedge fund, has been apprehended at Singapore’s Changi International Airport. This arrest comes after Zhu attempted to flee the country following a court order demanding his cooperation with the liquidator’s investigations. This article delves into the relentless mismanagement and regulatory violations that led to the collapse of 3AC and the subsequent fallout for its founders and investors.

The Fall from Grace

Just a few months ago, 3AC managed over $10 billion in digital assets, making it a major player in the Asian hedge fund industry. However, the fund’s downfall began with a series of failed leveraged trades on the Terra ecosystem, resulting in massive losses and leaving creditors with over $3.5 billion in claims. This catastrophic event triggered a chain reaction that led to the bankruptcy of 3AC’s counterparties, including Celsius, Voyager, and FTX.

Avoiding Responsibility

One would expect the founders of a hedge fund responsible for such a massive financial collapse to shoulder the blame and take steps to rectify the situation. Instead, Su Zhu and his co-founder, Kyle Livingston Davies, chose to evade responsibility. Davies fled to Dubai earlier this year and even opened a restaurant, while Zhu transformed his $36 million luxury property in Singapore into an eco-farm. These actions demonstrate a complete disregard for the investors who entrusted them with their funds.

Regulatory Violations

The Monetary Authority of Singapore (MAS) has barred both Zhu and Davies from conducting any enterprise investment activity in the city-state for nine years due to various regulatory violations. One such violation was exceeding 3AC’s statutory assets under management limit, a clear breach of trust and a failure to adhere to industry regulations. These violations further highlight the founders’ lack of integrity and willingness to bend the rules for personal gain.

The collapse of 3AC has left creditors in a dire situation, with little hope for recovering their investments. The appointed liquidator, Teneo, has stated that they will seek to engage with Zhu during his imprisonment in an attempt to recover assets acquired using 3AC’s funds. This process, however, is likely to be arduous and may not yield favorable results for creditors, who have already suffered significant financial losses.

Adding insult to injury, Su Zhu and Kyle Livingston Davies launched OPNX, a platform for trading bankruptcy claims on fallen crypto companies, including 3AC and FTX. Despite raising $25 million in funding, the platform failed to gain traction and saw a significant decline in its token value following Zhu’s arrest. OPNX’s claims dashboard remains dysfunctional, further evidencing the founders’ inability to execute successful ventures.

Despite their ongoing legal battles and the financial wreckage left behind, Zhu and Davies attempted to reshape their public image. They established 3AC Ventures, a venture capital fund, and made investments in projects like “Gamerlan.” However, these efforts seem unlikely to salvage their tarnished reputation or provide solace to the creditors who have suffered immense losses.

While the future looks bleak for the creditors of 3AC, there have been some promising developments. Teneo, the liquidator for 3AC, has successfully recovered several nonfungible tokens owned by the hedge fund and auctioned them off, netting a total of $13.4 million. This recovery of assets provides a glimmer of hope for creditors and serves as a reminder that there may yet be a chance to recoup some of their losses.

The demise of Three Arrows Capital serves as a cautionary tale for investors and fund managers alike. The mismanagement, regulatory violations, and lack of accountability exhibited by Su Zhu and Kyle Livingston Davies highlight the importance of due diligence when selecting investment opportunities. It is crucial to learn from their mistakes to prevent similar catastrophes in the future.

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