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Three Arrows Capital Under Investigation By The SEC & CFTC, Here’s Why

18 Oct, 20222 min readRegulation
Three Arrows Capital Under Investigation By The SEC & CFTC, Here’s Why

Back in May, the collapse of the Terra ecosystem put the crypto market in a terrible position. The crash led to the creation of doubts and hesitation among people about investing in cryptocurrencies and the need for additional regulation and policing.

Now, the top U.S. regulators – the SEC and the CFTC – have started investigating 3AC.

They intend to find any gaps and want to know if the 3AC manager violated rules by keeping the investors in dark about the strength of the company’s balance sheet as they didn’t register with the authorities. The investigation can supposedly lead to additional penalties for the firm and the individuals associated with it.

The fund had suffered major losses following the collapse of the TerraUSD stablecoin. 3AC couldn’t recover from the crash and was unable to meet margin calls from its lenders. Therefore, the company declared bankruptcy.

The U.S. authorities and the Monetary Authority of Singapore criticized the failed hedge fund for presenting false information and surpassing the limit on its AUM.

Investigations Peak

Just a month back, following the request of the Singapore high court, liquidators seized control of the 3AC funds valued at tens of millions of dollars.

However, the court-appointed liquidator Teneo expressed that 3AC founders were non-compliant with the unwinding process. In turn, the liquidator asked the U.S. judge to serve a subpoena to the 3AC founders, as mentioned in the court filing of last week.

Earlier in June 2022, South Korean officials had also launched an investigation to understand if international price manipulation and other issues were in some part responsible for the UST crash.


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