The Monetary Authority of Singapore (MAS) has reprimanded cryptocurrency hedge fund Three Arrows Capital (TAC) for providing false information to the regulator and exceeding the assets under management (AUM) threshold allowed for a registered fund management company (RFMC).

In August 2013, TAC obtained its RFMC status which allowed it to carry on fund management business with no more than 30 qualified investors and manage assets of no more than S$250 million.

TAC novated the management of the only fund it managed to an offshore entity in the British Virgin Islands on 1 September 2021.

While it resumed management of a portion of the fund’s assets in February 2022, TAC notified MAS on 29 April 2022 of its intent to cease fund management activity in Singapore with effect from 6 May 2022.

The reprimand relates to contraventions by TAC which occurred prior to its notification to MAS in April 2022. MAS has been investigating these contraventions since June 2021.

MAS had listed the three contraventions by TAC, under the Securities and Futures Act 2001 (SFA) and the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR).

According to the regulator, TAC failed to ensure that information provided to MAS is not false or misleading. TAC had represented to MAS that it had novated the management of its fund to an unrelated offshore entity with effect from 1 September 2021. However, this representation was misleading as TAC and the offshore entity shared a common shareholder, Su Zhu, who is also a director of TAC.

TAC had also failed to inform MAS within the required timeline of changes in the directorships and shareholdings of its directors, Su Zhu and Kyle Livingston Davies.

There was also a prolonged breach of the AUM threshold as TAC exceeded its allowable AUM of S$250 million for a RFMC between July 2020 and September 2020 and between November 2020 and August 2021.

MAS said in a statement,

“In light of recent developments which call into question the solvency of the fund managed by TAC, MAS is assessing if there were further breaches by TAC of MAS’ regulations.”