Bankrupt 3AC faces probe by US SEC, CFTC

Key Takeaways

  • SEC and CFTC are probing whether 3AC misled investors about its balances and failed to register with the two regulatory bodies.
  • Singapore’s Central Bank had also “reprimanded” Three Arrows for “providing false information” regarding its assets under management. 

Bankrupt crypto hedge fund Three Arrows Capital(3AC) is being probed by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). The regulatory watchdogs are looking into whether 3AC violated certain rules around investor conduct and whether the firm misled investors about its balances and also failed to register with the two regulatory bodies.

The latest development comes amid 3AC already facing investigation by regulators in Singapore. In a press release, the Monetary Authority of Singapore had “reprimanded” Three Arrows for “providing false information” regarding its assets under management and said it suspected further foul play.MAS stated that the business surpassed its $250 million asset threshold and gave the company’s financial authority misleading information.

Three Arrows Capital was one of the leading crypto firms before its fall following unfavorable market conditions in the digital asset market and the collapse of Terra blockchain. The firm sustained losses on its position in the Terra blockchain project, which crashed after the stablecoin TerraUSD crumbled in May.

3AC was forced into bankruptcy following the crash of algorithmic stablecoin LUNA in Ma. According to reports, 3AC had previously invested over $200 million in LUNA tokens in February. The latter loss of the stETH peg brought 3AC closer to bankruptcy.

The crypto hedge fund was ordered into liquidation on June 27 after Voyager Digital issued a notice of default to 3AC for its failure to pay its 15,250 BTC and 350 million USD Coin. On June 29, 3AC was ordered to liquidate assets on June 29, and later, on July 1, the firm declared bankruptcy. Recently, the Singapore High Court allowed Teneo, an advisory firm appointed to liquidate Three Arrows, to probe the fund’s assets held in Singapore.

Last week, in a court motion filed to the United States Bankruptcy Court Southern District of New York, Teneo claimed that standard methods to contact the Three Arrows Capital founders Su Zhu and Kyle Davies have failed as the “Founders’ whereabouts remain unknown.” With the new motion, liquidators seek the “authority to serve subpoenas for the production of documents and testimony on the Founders, the Investment Managers, and third parties.”

Saniya Raahath
Saniya Raahath

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