A court in the British Virgin Islands has ordered Three Arrows Capital - the crypto-focused hedge fund - into liquidation after failing to repay its creditors following significant declines in the price of bitcoin and other cryptocurrencies.
Three Arrows Capital - formed in 2012 by Su Zhu and Kyle Davis - had been known in the crypto-industry for its 'bullish' investment strategy. Su Zhu admitted in May 2022 that the firm's bet on escalating crypto prices was 'regrettably wrong'. Following reports in June that the firm faced significant liquidations by its lenders, Su Zhu posted a cryptic tweet stating that '[they were] fully committed to working this out' without providing further clarification.
Last week, crypto broker Voyager Digital announced that Three Arrows Capital had defaulted on a loan valued at more than $665 million, partially paid in bitcoin. Global advisory firm, Teneo, has been appointed liquidators to oversee Three Arrow Capital's liquidation. The firm is expected to launch a website in the coming days to allow creditors to submit claims and receive information about the insolvency.
Prior to the liquidation and recent crypto market downturn, Three Arrows Capital had claimed $3 billion in assets under management. The recent crypto market downturn has attracted US legislators to comment on the lack of financial oversight and investor protections in the sector.
Yesterday, Three Arrows Capital was dealt another blow after the Monetary Authority of Singapore (MAS) issued an official letter - labelled a 'reprimand' - to the hedge fund citing licensing and compliance failures. The MAS noted that it is investigating further regulatory breaches in light of recent developments.
This is a timely reminder of the need for legislative clarity in the industry and for individual investors to exercise caution when making high-volatility investments.
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