Singapore regulator censures embattled crypto fund Three Arrows

Singapore’s markets regulator has reprimanded Three Arrows Capital for filing false information, dealing a further blow to the crypto hedge fund being liquidated over its failed bets.

The Monetary Authority of Singapore said on Thursday that Three Arrows had breached its allowed threshold for S$250mn assets under management. It also said the fund manager had failed to notify it of changes to directorships or shareholdings.

MAS’s public rebuke is a rare step and compounds the problems at Three Arrows, one of the largest investors in the crypto market.

Co-founder Su Zhu has previously made the case for a crypto “supercycle”, in which prices would be immune from collapse on account of increasing adoption of crypto tokens. Among its big positions were holdings in Grayscale Bitcoin Trust, the world’s largest crypto investment vehicle.

Tumbling prices have undermined its holdings and the investment firm has failed to meet demands from lenders to put up extra funds to back its loans. This week Teneo, the consultancy, was appointed as joint liquidator for Three Arrows in the British Virgin Islands, where the sole fund it managed was based.

MAS said Three Arrows had been under investigation for a year. “In light of recent developments which call into question the solvency of the fund managed by Three Arrows, MAS is assessing if there were further breaches by Three Arrows of MAS’ regulations,” it said.

The company became a registered fund management company in Singapore in 2013, permitted to manage assets of up to S$250mn. MAS said it has exceeded the limit twice, between July and September 2020 and between November 2020 and August 2021.

At the start of September last year Three Arrows shifted the management of its sole fund to an offshore entity in the BVI. However it failed to notify the Singapore regulator that Zhu was also a shareholder of the BVI entity.

Three Arrows did not immediately respond to a request for comment.

Earlier this week Canadian crypto broker Voyager Digital issued Three Arrows with a default notice after failing to make good on a $650mn loan. The loan was made up of approximately $350mn worth of USDC — a stablecoin — as well as more than 15,000 bitcoin.

Bitcoin, by far the world’s most popular cryptocurrency, has lost approximately 70 per cent of its value since posting an all-time high of almost $70,000 last November. The industry’s market cap has also plummeted from more than $3tn — a high posted during last year’s bull run — to about $900bn in recent weeks.