Reports indicate that the CFTC and SEC are investigating Three Arrows Capital. US regulators want to understand whether the Singapore-based cryptocurrency hedge fund has violated some of the rules and laws that hedge funds must follow.
Based on sources, U.S. regulators appears to think 3AC may have misled clients about its balance sheet and not properly disclosed why the fund was not registered with the regulatory agency.
At the end of July, Kyle Davies and Su Zhu, the founders of Three Arrows Capital, in an interview with Bloomberg informed that they had to disappear from the public radar because they received several death threats after a British Virgin Islands court ordered them to file for bankruptcy and liquidate all assets owned by 3AC.
In the interview, the two founders explained that despite being in an unknown location, they have been in communication with the relevant authorities "from day one." However, according to the lawyer responsible for the liquidation, none of the co-founders cooperated.
Different reports say Teneo, the company responsible for liquidating 3AC's funds, needs to get permission from a U.S. judge. All forms of communication so far have not received a response from the founder of 3AC.
"Zhu and Davies have not fully cooperated with the investigation after the incident that happened a few months ago. In addition, Celsius and FTX are also under regulatory monitoring. Celsius Network is another crypto company filing for bankruptcy following the crash of the Terra ecosystem. However, months after its bankruptcy, regulators are still investigating the exact cause of the company's collapse.
The CFTC is currently investigating several possible market manipulation behaviors and a lack of transparency in the use of its clients' funds. Although, unlike 3AC, Celsius representatives are indeed cooperating with regulators.
In another separate report on October 14, 2022, Joseph Rotunda, Director of the Enforcement Division at the Texas State Securities Board (TSSB), announced that he is investigating FTX US for potentially violating state law by offering unregistered securities products in the United States.
According to Rotunda, FTX US may offer non-registered securities in the form of accounts with income to residents of that country. He found that FTX offers returns in ETH of up to 8% APY, which in his words, “looks like an investment contract” despite not being registered in the state to offer such services.
