The Singapore regulator's warning was made just before the crypto-hedge fund filed for bankruptcy in the US.
The enforcement action by the Monetary Authority of Singapore (MAS) last Thursday came exactly one day before the crypto hedge fund based in the city-state filed for bankruptcy in a US court. It is a step that is likely to prompt many questions as to whether it was acting promptly enough, particularly as there do not seem to be previous announcements specific to the case.
The reprimand was posted on the regulator's website on 30 June while the hedge fund applied for bankruptcy in the US one day later, on 1 July, according to information from various news and media sources (collated Google news query).
As finews.asia previously indicated, this comes a week after an ostensible court order in the British Virgin Islands requesting it liquidate after being sued by creditors.
Protecting US Assets
According to «Bloomberg» (paywall), the step to file for Chapter 15 bankruptcy in the US was taken as a way of protecting the crypto-hedge fund's North American assets while the liquidation gets underway in the British Virgin Islands. The news service cited court papers that indicated representatives for Three Arrows filed the petition in the US Bankruptcy Court for the Southern District of New York.
Those steps seem to have forced the MAS' hand although they may simply be preparing the stage for future action. The regulator had been told by Three Arrows on 29 April that it intended to cease fund management activity in Singapore from 6 May onwards.
It also emphasized that the steps they were taking only dealt with breaches that had occurred before April and which the MAS has been investigating for more than one year.
Focusing on the Co-Founders
The charges it has leveled seem squarely aimed at the hedge fund co-founders, Su Zhu, and Kyle Livingston Davies, both of whom were former Credit Suisse traders.
The former did not indicate he was also a shareholder of an offshore entity that Three Arrows shifted management activities to in September 2021 and both did not tell the MAS within the required deadline of changes in directorships and shareholdings.
The fund also breached required assets under management thresholds in two separate instances in 2020 and 2021.
Too Little, Too Late
The last sentence of the MAS is important, not least in that it did appear to refer to actions being undertaken in other jurisdictions.
«In light of recent developments which call into question the solvency of the fund managed by TAC, MAS is assessing if there were further breaches by TAC of MAS’ regulations», the MAS wrote.
But it does appear to be too little, too late in the current context, given that the US and the British Virgin Islands seem to have moved beyond questions of solvency and are moving to protect whatever is left for creditors. At this juncture, the reprimand seems to be mainly aimed at setting the stage for further action against the co-founders, and little else.
