- Three Arrows Capital is allegedly being investigated by the SEC and the CFTC
- The agencies are looking into whether investors were protected and if the fund was adequately registered
- Three Arrows Capital blew up in July having lost around $3 billion since April
Two regulatory bodies in the U.S. are investigating whether the bankrupt crypto investment firm Three Arrows Capital broke securities and consumer laws in its practices. Bloomberg reported yesterday that the investment firm, which was liquidated back in July, is now in the sights of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), which are looking into whether the fund misled investors over the strength of its balance sheet and was adequately registered.
Three Arrows Had $3 Billion April
Three Arrows Capital was one of the most prominent crypto firms in the space throughout the last bull run, with roughly $3 billion in assets under management back in April. However, its large holdings all suffered, and in some cases caused, the market downturn – LUNA famously went bust, with $60 billion simply falling out of the ecosystem, while the Grayscale Bitcoin Trust was trading at a 29% discount to Bitcoin around the time of its insolvency.
Now the U.S. authorities are apparently investigating the firm, with Bloomberg citing an inside source as saying that the CFTC is looking into whether investors were adequately protected and the SEC seeing if it can squeeze any money out of the already pulped lemon by investigating its registration, or otherwise.
Liquidators Only Recovered Tens of Millions
How much money each can hope to get out of the defaulted fund is unknown, but it is likely that the two agencies will have to join a long queue. Only tens of millions in assets have been collected from the firm, while liquidator Teneo has accused the founders, Kyle Davies and Su Zhu, of not cooperating.
They even took the unusual step of asking a U.S. judge for permission to serve Zhu and Davies with subpoenas through their Twitter accounts and email addresses because normal methods have failed, according to court documents filed last week.
