Three Arrows Capital Said to Face Probes by US SEC, CFTC Over Investor Conduct Violations

Three Arrows Capital (3AC) is facing a probe by two US authorities in the wake of the firm’s bankruptcy. A recent report reveals that the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are looking into potential investor conduct violations by Three Arrows. The regulators are explicitly investigating whether the company failed to register with the two organisations and deceived investors about its holdings. The collapse of the Terra ecosystem in May pushed 3AC into a major collapse from being the world’s largest crypto hedge fund.

According to a report by Bloomberg citing sources familiar with the matter, the scrutiny from the regulators could lead to additional penalties for the firms and the individuals. Currently, the whereabouts of Three Arrows founders Su Zhu and Kyle Davies remain unknown.

It is worth noting that the SEC and CFTC have not confirmed that an investigation is ongoing. Bloomberg was instead informed of the supposed investigation by an unnamed source.

Three Arrows Capital (3AC) first encountered financial issues when it lost money during the collapse of TerraUSD in May.

The company defaulted on a loan from Voyager Digital on June 27 and was ordered to liquidate assets on June 29. Days later, on July 1, it declared bankruptcy. The case attracted more controversy as the company’s founders abandoned its Singapore offices in July before fleeing the country and failing to make court appearances.

Three Arrows Capital is already under investigation by regulators in Singapore. Those regulators claim that the company provided false information to the company’s monetary authority and exceeded its assets under management (AUM) threshold of $250 million (roughly Rs. 2,100 crore).

Following the bankruptcy, advisory firm Teneo was appointed as the company responsible for liquidating 3AC’s assets. However, Teneo has been unsuccessful in reaching the co-founders of Three Arrows Capital, as they have seemingly disappeared.

The liquidator is now looking for permission to issue subpoenas to these co-founders as a last resort. The company has also complied with orders as part of its bankruptcy proceedings.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.