Singapore regulator rebukes embattled crypto fund Three Arrows

Singapore's markets regulator has reprimanded Three Arrows Capital for submitting false information, dealing another blow to the crypto hedge fund that was liquidated over its failed bets.

The Monetary Authority of Singapore said on Thursday that Three Arrows had exceeded the permitted assets under management threshold of S$250 million. It also said the fund manager failed to inform it of any changes in directorships or shareholdings.

MAS's public rebuke is a rare move and exacerbates problems at Three Arrows, one of the largest investors in the crypto market.

Co-founder Su Zhu has previously advocated for a crypto “supercycle” in which prices would be protected from a collapse due to increasing adoption of crypto tokens. His large positions included stakes in Grayscale Bitcoin Trust, the world's largest crypto investment vehicle.

Falling prices have eroded its holdings and the investment firm has failed to meet demands from lenders to provide additional funds to secure its loans. This week consultancy Teneo was appointed joint liquidator for Three Arrows in the British Virgin Islands, where the only 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, the MAS is investigating whether there have been any further breaches of the MAS regulations by Three Arrows,” it said.

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

In early September last year, Three Arrows moved the management of its sole fund to an offshore unit in the British Virgin Islands. However, it failed to inform the Singapore regulator that Zhu was also a shareholder in the BVI entity.

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

Earlier this week, Canadian crypto broker Voyager Digital issued a warning to Three Arrows after it failed to repay a $650 million loan. The loan consisted of approximately $350 million worth of USDC – a stablecoin – as well as more than 15,000 Bitcoin.

Bitcoin, by far the world's most popular cryptocurrency, has lost about 70 percent of its value since hitting an all-time high of nearly $70,000 last November. The industry's market capitalization has also fallen in recent weeks from more than $3 trillion - a peak seen during last year's bull market - to about $900 billion.