Dubai’s regulators are scrutinizing the co-founders of now-defunct crypto hedge fund Three Arrows Capital over their new unregulated digital asset exchange, OPNX.
On April 18, Su Zhu and Kyle Davis received a written reprimand from Dubai’s Virtual Assets Regulatory Authority (VARA) for promoting OpenX without the required local license, Bloomberg reported. informed ofQuoting a statement from the regulator.
The other co-founders, Mark Lamb and Sudhu Arumugam, as well as OpenX CEO Leslie Lamb, also received reprimands.
The report states that in February VARA learned that OPNX was soliciting customers for its yet-to-be-launched platform, collecting personal data and marketing the exchange without any restrictions.
Therefore, it issued a cease and desist order on 27 February and another notice on 10 March. Despite this, OPNX launched on April 4, after which VARA issued an investor and marketplace alert.
Dubai’s action on OpenX is a sign that the country is taking a tighter approach to regulating the crypto space, despite its ambitions to position itself as a global hub for the industry.
The push coincides with wider efforts by the UAE to move out of the jurisdiction of the Financial Action Task Force’s “grey list” that does not do enough to uncover illegal money.
Zhu and Davis, in partnership with Lamb and Arumugam, created an exchange called OpenExchange to trade crypto-related bankruptcy claims.
Since the collapse of his fund, he has made Dubai one of his primary bases, although he was previously headquartered in Singapore.
In a comment to Bloomberg, Leslie Lamb said that OPNX has not done any marketing targeting Dubai or the UAE and is cooperating with VARA’s investigation.
“Customers from the UAE have never been able to open an account on OPNX,” he added.
Zhu said in a separate message that “while Kyle and I helped contribute the initial ideas for OPNX, Leslie is very much the CEO and we are not involved in the day-to-day.”
Three Arrows Capital was one of the most prominent hedge funds and trading firms in the crypto industry.
company filed for bankruptcy In July last year, it announced its business had “fallen due to extreme volatility in the cryptocurrency markets.”
Open Exchange fails to lift off despite bankruptcy claims booming market
Despite all the media engagement and marketing, the open exchange had a weak start, with a trading volume of only $13.64 on the first day.
By the fifth day, volume had risen to $12,398, which is still negligible compared to the booming market for crypto bankruptcy claims.
As informed ofExperts believe that between $20 billion and $30 billion is currently locked up in crypto bankruptcy.
It has also encouraged Exclaim, a bankruptcy claims marketplace, to focus exclusively on crypto bankruptcies.
According to Exclaim founder Matthew Sedigh, the platform has attracted more users and generated more revenue since its pivot to crypto bankruptcy than in the past two years.