The Monetary Authority of Singapore (MAS) has issued nine-year prohibition orders against two directors of failed hedge fund Three Arrows Capital (TAC), Zhu Su and Kyle Livingston Davies.

Zhu was the CEO and director of TAC while Davies was the hedge fund’s chairman and director.

TAC went under last July amid the crypto crash. It is reportedly under probe in other jurisdictions including the US.

The POs, with effect from Sept 13, were issued after the two individuals were found to have contravened the Securities and Futures Act 2001 (SFA) and Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).

Under the PO, Zhu and Davies will not be allowed to perform any regulated activity and from 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, says MAS on Sept 14.

Last June, MAS had already reprimanded TAC for providing false information to MAS and for failing to notify MAS about changes to Zhu’s and Davies’ directorship and shareholdings.

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The Singapore-based firm was also found to have exceeded the assets under management threshold allowed for a registered fund management company.

Upon further investigations, MAS uncovered the following additional SFA and SFR contraventions committed by TAC between August 2020 and January 2022.

First, they did not notify MAS of the employment of a representative within the required timeframe.

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Between August 2020 and September 2021, TAC employed one Cheong Jun Yoong Arthur to be a portfolio manager but did not tell MAS.

TAC had also lied to MAS, saying it did not notify MAS about Cheong’s employment because he did not carry out any regulated activity, when in fact, Cheong was managing funds at TAC between August 2020 and September 2021.

TAC was also found to have failed to put in place an appropriate risk management framework to identify, monitor, and address risks associated with the cryptocurrency and digital asset investments under its management.

As directors of TAC, Zhu and Davies were “primarily responsible” for ensuring that TAC complied with regulatory requirements.

MAS’ investigation showed that they had failed to discharge their duties and were responsible for TAC’s breaches.

“Senior management of fund managers are required to implement robust risk management measures to protect the interest of investors,” says Loo Siew Yee, assistant managing director (policy, payments and financial crime) at MAS.

“MAS takes a serious view of Zhu’s and 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,” adds Loo.

MAS slaps prohibition orders on former Three Arrows directors

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