Examination by the agencies may result in monetary fines and other consequences for businesses and individuals.
Bankrupt crypto hedge fund Three Arrows Capital (3AC) is now at the center of a probe by the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC), which seeks to determine if the firm violated rules by misleading investors about its balance sheet and not registering with the two agencies.
The Singapore-based crypto firm, which was recently one of the biggest firms in the crypto space, filed for bankruptcy in July after the widespread sell-off in digital assets, which was in part sparked by the collapse of the Terra blockchain along with the algorithmic stablecoin TerraUSD.
Three Arrows also attributed its bankruptcy to the extreme market fluctuations that saw some of the biggest coins, including Bitcoin, Ethereum, Cardano, Dogecoin, etc., lose almost half of their values. In the weeks that followed, as the token’s fall extended throughout the whole crypto market, 3AC was unable to fulfill margin calls from its lenders and ultimately declared bankruptcy.
The crypto firm was subsequently reprimanded by the Monetary Authority of Singapore (MAS) for misleading it with allegedly false information.
Tens of millions of dollars worth of the fund’s assets have been taken over by liquidators in charge of managing the fall of the company, which was operating in Singapore at least as early as May.
However, that only amounts to a small portion of the billions of dollars that creditors, such as the bankrupt cryptocurrency lenders Voyager Digital and Celsius Network, claimed they were owed.
The court-appointed liquidator, Teneo, claims that the founders of 3AC haven’t properly cooperated with the dissolution. According to court records submitted last week, they took the unprecedented step of seeking a US judge’s authorization to serve subpoenas to Zhu and Davies using their Twitter accounts and email addresses due to the failure of standard techniques in such cases.
Examination by the agencies may result in monetary fines and other consequences for businesses and individuals. A lawyer listed in bankruptcy court filings as a representative for Three Arrows founders Su Zhu and Kyle Davies has since not replied to inquiries made outside local business hours in Singapore.
At its height, Three Arrows managed a few billion dollars, making it a significant player in the cryptocurrency market. The firm was well-known for its positive outlook, and it also received loans from businesses around the sector and invested in some of the best-known start-ups in the crypto sector.
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