The two key U.S. regulators, CFTC and SEC, are investigating the bankrupt crypto fund Three Arrows Capital. According to a Bloomberg report, CFTC, known as Commodity Futures Trading Commission, and SEC, known as the Securities and Exchange Commission, are looking into whether the fund violated rules.
As per the Bloomberg report, CFTC and SEC are now looking into whether the fund Three Arrows Capital violated rules by misleading investors about the strength of its balance sheet and not registering with the agencies.
Three Arrows Capital, which is a Singapore-based fund that started actively trading cryptocurrencies in 2017, was one of the world’s largest crypto funds. On the first of July, after filing Chapter 15 bankruptcy proceedings, claiming that it owed $3.5 billion to creditors following its collapse, it lost its position.
However, according to Blockchain analytics firm Nansen’s estimation, in March 2022, Three Arrows Capital had around $10 billion in assets under management. The exposure of Terra’s luna and USD tokens and Grayscale’s Bitcoin Trust is the main reason behind 3AC’s collapse.
In May, Terra’s token price crumbled, which caused financial troubles for not just 3AC but also Celsius and Voyager, which is now bankrupt. Not only the U.S. regulators CFTC and SEC are investigating this issue but also Singapore regulators, from where 3AC facing increased scrutiny.
Singapore’s financial watchdog MAS, the Monetary Authority of Singapore, made a filing, in which they alleged that the hedge fund may have failed to ensure that the information provided to it was not false or misleading. 3AC also failed to inform MAC of any changes to directorships and shareholdings and committed a prolonged breach of its AUM threshold.
The liquidation of Three Arrows assets is already well underway, and now this investigation could create a mountain of troubles for it.