Singaporean authorities have apprehended Su Zhu, the leader of Three Arrows Capital (3AC), in response to a court-issued order. The arrest transpired at Changi Airport as Zhu attempted to leave Singapore following the court’s directive. Zhu faces a four-month prison term, while his 3AC co-founder, Kyle Davies, has also received a similar sentence. Despite the legal pressure, Davies has managed to evade capture, prompting intensified efforts by law enforcement to locate him.
Zhu’s detention stems from his non-compliance with an order mandating his cooperation in investigations related to Three Arrows Capital’s bankruptcy filing in the previous year. The collapse of 3AC in the second quarter of 2022 had significant repercussions across the cryptocurrency sector, impacting companies such as Celsius Network and Voyager Digital. Prior to its bankruptcy, 3AC managed assets totaling approximately $10 billion, solidifying its status as a leading global crypto hedge fund.
Complicating matters further, Zhu and Davies launched an unregulated cryptocurrency platform called Open Exchange (OPNX) early in 2023, introducing their own digital currency, FLEX. However, OPNX quickly fell under regulatory scrutiny, resulting in a substantial fine of around $2.8 million imposed by Dubai’s Virtual Assets Regulatory Authority (VARA) by August 2023.
Singapore’s regulatory body, the Monetary Authority of Singapore, also took swift action, restricting Zhu and Davies from holding ownership or management positions in licensed capital markets ventures for an extended period of nine years, starting in September.
The repercussions of these developments reverberated in the financial realm. Following Zhu’s arrest, shares of Zhu Su’s Friend Tech Keys plummeted by an alarming 38%.
These incidents are part of a growing trend in the crypto industry, where increased regulatory scrutiny is leading to legal consequences for individuals involved in illicit activities, such as insider trading. In August, former Opensea Executive Nate Chastain received a three-month prison sentence for insider trading, marking the first arrest for a digital asset insider trading scheme, according to the U.S. Department of Justice.
In a separate case earlier this month, Faruk Fatih Özer, the founder of the collapsed Turkish crypto exchange Thodex, along with his two siblings, was sentenced to 11,196 years, 10 months, and 15 days in prison, accused of defrauding investors out of millions of dollars. These instances underscore the heightened regulatory oversight in the crypto industry, translating into legal consequences for individuals engaged in unlawful activities such as insider trading.