Three Arrows Paper Trail Leads To Trading Desk Obscured Via Offshore Entities

The dramatic downfall (and now bankruptcy case) of the once-mighty crypto hedge firm Three Arrows Capital has roiled the digital-asset market and contributed to a record first-half tumble in bitcoin’s price.

However, for investors and law enforcement officers following the money trail, the arrows point to an obscure legal organisation that has so far  avoided the limelight while still aggressively trading, and possibly shielding some assets from recovery.

Aside from using its tens of billions of dollars of assets under management to invest in new ventures and take large market positions, Three Arrows Capital also operated an over-the-counter trading desk called Tai Ping Shan (TPS) Capital. According to a scraped version of the site by Google, the organisation was formerly identified on LinkedIn as “the official OTC desk of Three Arrows Capital,” but that description has since been removed, indicating that Three Arrows Capital and TPS are no longer affiliated.According to insiders in the digital asset industry in Asia, TPS Capital continues to trade, despite the fact that its parent firm is being liquidated in the British Virgin Islands and is under investigation in Singapore.

While the directors of a company are not public information under BVI law, the name Three Lucky Charms sounds similar to Three Arrows Capital, whose three principals are Su Zhu, Kyle Davies, and a third individual whose identity is unknown.

TPS Research, which owns 47.5% of TPS Capital’s Singapore entity, also keeps its directors hidden from the public as allowed under BVI law.

Caymans-registered Tai Ping Shan, which owns 5% of Singapore entity TPS Capital, names Paul Muspratt, managing director of corporate services provider West Bay Global Services, as one of its directors, alongside Steven Sokohl, another West Bay employee, and Yi Long Fung.

Yi doesn’t have much of an online presence. He is listed as a director of TPS Capital’s Canadian-registered entity, which was founded in February 2022 and has an address in the Thornhill neighbourhood of Toronto.

What happened to Three Arrows’ money?

For a fund that was touted to be managing billions of dollars, Three Arrows’ filings with the Singaporean government show a paltry income that would suggest management of a significantly smaller amount.

According to a return filed for the 2020 fiscal year-end, Three Arrows Singapore reported total assets of S$3.3 million ($2.36 million) and a profit of S$1.15 million ($823,015) for the year. Zhu and Davies received S$6.33 million in dividends.

According to Securities and Exchange Commission (SEC) filings, Three Arrows’ Singapore and Three Arrows’ BVI units split the purchase of Three Arrows’ December 2020 position in Grayscale Bitcoin Trust (GBTC). According to the Monetary Authority of Singapore, the Singapore entity was licenced to manage S$250 million ($179 million).

A Singapore-based person involved in the institutional digital assets industry said TPS owned and traded the majority of Three Arrows’ treasury. Another person, in a similar position at an Asia-based institutional crypto firm, also stated that TPS is “where the action was” for Three Arrows.

Singapore’s authorities are not impressed

Earlier this week the Monetary Authority of Singapore censured Three Arrows for misreporting information about the size of its holdings and issued a reprimand.

“The reprimand relates to contraventions by [Three Arrows Capital] which occurred prior to its notification to MAS in April 2022. MAS has been investigating these contraventions since June 2021,” MAS wrote. According to the regulator, Three Arrows provided “misleading” information.

MAS also wrote: “In light of recent developments which call into question the solvency of the fund managed by [Three Arrows Capital], MAS is assessing if there were further breaches.”

However, while Three Arrows has declared bankruptcy in New York (it has yet to declare bankruptcy in Singapore as of July 2), TPS continues to use capital to trade.

Can regulators or the suit’s plaintiffs pierce the corporate veil between the two firms?