Three Arrows Founders Face 9-Year Trading Ban in Singapore Over Regulatory Violations
MAS stated that the co-founders of 3AC violated the Securities and Futures Act 2001 and the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).
On September 14, 2023, MAS imposed nine-year prohibition orders against Three Arrows’ founders Zhu Su and Kyle Livingston Davies, restricting them from engaging in any regulated financial activities in Singapore. These orders were based on multiple contraventions of Singapore’s Securities and Futures Act 2001 and Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).
Zhu Su served as the CEO and Director of 3AC, while Davies was the Chairman and Director. Both Zhu Su and Kyle Livingston Davies bore responsibility for the firm’s regulatory breaches committed between August 2020 and January 2022.
The issues Included:
- Failure to notify MAS about the hiring of a new portfolio manager.
- Providing false information to MAS.
- Lack of a proper risk management framework for managing digital asset investments.
Three Arrows Capital’s Rise and Fall
3AC was once a dominant player in the cryptocurrency hedge fund landscape. However, its fortune took a hit following the collapse of the Terra ecosystem last year, leading the firm to file for bankruptcy in July 2022 with more than $3.5 billion owed to top creditors.
Although MAS had reprimanded the firm in June 2022 for providing false information, it took another year for a thorough investigation to unravel further regulatory contraventions.
According to Ms Loo Siew Yee, Assistant Managing Director at MAS, robust risk management is vital to protect investors’ interests. The Prohibition Orders were not just punitive measures but were also aimed at sending a strong message to the financial community.
MAS highlighted its intention to remove executives and senior managers who blatantly ignore regulatory requirements and fail in their directorial duties.
Regulatory Implications for Singapore’s Financial Markets
The actions taken by the Monetary Authority of Singapore (MAS) against the founders of Three Arrows Capital (3AC) highlight the regulatory authority’s ongoing scrutiny in enforcing local financial laws. This move comes as digital assets and cryptocurrencies present fresh challenges to regulatory bodies worldwide.
The MAS investigation into 3AC emphasizes the importance for investment firms to comply with regulatory guidelines and maintain open lines of communication with governing bodies. Failing to do so not only risks legal consequences but could also compromise a firm’s reputation and operational stability.
MAS’s measures against the principals of Three Arrows Capital indicate the regulator’s focus on maintaining market integrity and safeguarding investor interests. The case brings attention to the pitfalls of not adhering to regulatory standards and serves as a cautionary tale. It also suggests that industry leaders and senior managers should heed the case as a warning against disregarding financial regulations.
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