SEC, CFTC Probing Bankrupt Crypto Hedge Fund Three Arrows Capital: Report

The federal agencies are looking into whether Three Arrows misled investors about its balance sheet and whether the hedge fund should have registered with them.

Oct 17, 2022 at 8:02 p.m. UTC

Updated Oct 17, 2022 at 8:16 p.m. UTC

U.S. Securities and Exchange Commission in Washington, D.C. — (Jesse Hamilton/CoinDesk)

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The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are examining whether bankrupt crypto hedge fund Three Arrows Capital violated rules by misleading investors about its balance sheet and not registering with the two agencies, Bloomberg reported, citing two people familiar with the matter.

The Singapore-based Three Arrows filed for bankruptcy in July, saying its business had “collapsed in the wake of extreme fluctuations in cryptocurrency markets.” In particular, the hedge fund suffered huge losses stemming from the collapse of the terraUSD algorithmic stablecoin in May. At the end of June, the Monetary Authority of Singapore (MAS) reprimanded Three Arrows Capital for misleading it with allegedly false information.

The CFTC didn’t immediately respond to a request for a comment on the report.

With Three Arrows’ co-founders Su Zhu and Kyle Davies’ location unknown and the liquidators in the bankruptcy case and their attorneys unable to track them down, the liquidators recently asked the court to be able to serve the two subpoenas via their email addresses, Twitter accounts and the email addresses of their attorneys.

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