MAS issues prohibition orders against Three Arrows founders
Michelle Zhu
THE founding executives of defunct crypto hedge fund Three Arrows Capital were issued nine-year prohibition orders (POs) by the Monetary Authority of Singapore (MAS) for contravening the Securities and Futures Act (SFA), along with Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).
The POs were effective Wednesday (Sep 13) and prohibit Three Arrows’ co-founders Zhu Su and Kyle Livingston Davies from performing any regulated activity and taking part in the management of, acting as a director of, or becoming a substantial shareholder of any capital market services firm under the SFA.
Zhu was chief executive, while Davies was chairman of Three Arrows before it was ordered to liquidate in June last year. Both were also directors of the fund.
The POs followed MAS’ reprimand of Three Arrows for providing false information to the central bank; failing to notify MAS about changes to Zhu and Davies’ directorship and shareholdings; and exceeding the assets under management threshold allowed for a registered fund management company.
On Thursday, MAS said it conducted further investigations into the fund, Zhu and Davies.
The move revealed further SFA and SFR contraventions committed by Three Arrows between August 2020 and January 2022, including the fund’s failure to have in place a risk management framework against risks associated with cryptocurrency and digital asset investments under its management.
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The fund also failed to notify MAS of its employment of a portfolio manager, Arthur Cheong, within the required timeframe.
Three Arrows falsely claimed that it did not notify MAS of Cheong’s employment because he did not carry out any regulated activity when he had, in fact, performed fund management activity on the fund’s behalf between August 2020 and September 2021.
“As directors of Three Arrows, Mr Zhu and Mr Davies were primarily responsible for ensuring that Three Arrows complied with regulatory requirements under the SFA and SFR. MAS’ investigation showed that they had failed to discharge their duties and were responsible for Three Arrows’ breaches,” said MAS.
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“Senior management of fund managers are required to implement robust risk management measures to protect the interest of investors,” added Loo Siew Yee, assistant managing director of policy, payments and financial crime at MAS.
“MAS takes a serious view of Mr Zhu’s and Mr Davies’ flagrant disregard of MAS’ regulatory requirements and dereliction of their directors’ duties. MAS will take action to weed out senior managers who commit such misconduct.”
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