The founders of collapsed Singapore crypto hedge fund Three Arrows Capital, once managing US$10 billion, were hit with nine-year bans by the Monetary Authority of Singapore, while co-founder Su Zhu was arrested at Changi Airport for defying court orders.
Three Arrows Capital, known as 3AC, was founded in 2012 by Columbia University classmates Kyle Davies and Su Zhu. It began in foreign-exchange derivatives arbitrage before pivoting to crypto in 2017, growing into one of the industry's most prominent funds with heavy bets on tokens including Luna. At its peak the fund claimed a net asset value of US$18 billion and borrowed billions to fund its trading.
The May 2022 collapse of the Terra ecosystem wiped out 3AC's leveraged positions. A court in the British Virgin Islands ordered the fund liquidated on June 27, 2022, and bankruptcy filings showed US$3.5 billion in creditor claims, making it one of the largest hedge-fund trading losses of all time. Its implosion set off a wave of failures across the sector, including crypto lender Voyager Digital.
Singapore's regulator moved aggressively. The Monetary Authority of Singapore reprimanded the fund for providing false information and exceeding its assets-under-management threshold, then issued nine-year prohibition orders against Zhu and Davies, barring them from managing, directing or holding substantial stakes in any capital markets business in the city-state. MAS cited flagrant disregard of regulatory requirements and dereliction of directors' duties, including misleading the authority and lacking an effective risk management framework.
The drama turned cinematic in September 2023, when liquidators announced that Zhu had been apprehended at Changi Airport while apparently attempting to leave Singapore. Both founders had been sentenced to four months' committal for deliberately failing to cooperate with the liquidators' investigation; Davies' whereabouts remained unknown, with police directed to arrest him to serve the sentence.
In a final twist of defiance, Zhu and Davies launched a new crypto platform, Open Exchange, in early 2023 even as creditors pursued 3AC's remaining assets. The saga cemented Singapore's reputation for coming down hard on crypto excess, and became the defining symbol of the 2022 digital-asset winter.
The collapse also exposed how deeply intertwined the crypto ecosystem had become. 3AC's creditors included some of the industry's biggest names, and its failure accelerated the bankruptcies of lenders that had extended it billions in uncollateralised loans. For Singapore, which had courted crypto firms with a reputation for strict but fair oversight, the saga prompted tougher scrutiny of digital-asset businesses and became a staple reference in every debate about regulating the sector.