3AC founders draw ire of Dubai regulator over new project

Dubai’s Virtual Assets Regulatory Authority (VARA) warned residents against interacting with a new digital currency exchange floated by Su Zhu and Kyle Davies, Three Arrows Capital (3AC) founders.

After months of slugging it out with creditors, 3AC founders partnered with Mark Lamb and Sudhu Arumugam in 2023 to launch OPNX, a platform designed to allow investors to trade Web3 claims. Dubai’s regulatory watchdog alleges that OPNX and its founders failed to seek approval before promoting the exchange.

VARA notes that OPNX’s activities crossed its radar in February when the project began seeking customers and collecting personal data across the United Arab Emirates (UAE). In the latest public advisory, the regulator stated that it will closely monitor OPNX “to assess further corrective measures that may be required.”

“Through social media platforms, OPNX had been engaged in marketing the exchange without establishing warranted restriction for residents of Dubai/UAE,” the regulator said.

A cease-and-desist order was issued against OPNX’s promotional activities on February 27, and in April, VARA doubled down on its efforts with an “Investor and Marketplace Alert.” Despite the tsunami of regulatory challenges, Lamb and Arumugam maintain that the platform has not infringed on any of VARA’s legislation and is keen to open discussions with the regulator.

“At no point in time have UAE customers been able to open an account on OPNX,” Lamb said. “While Kyle and I helped contribute the initial ideas for OPNX, Leslie is very much the CEO and we aren’t involved in day to day.”

Both Zhu and Davis have caught flak over the collapse of 3AC in 2022, laying the foundation for even larger collapses in the industry. The aftermath of the implosions led to Blockchain.com, Voyager Digital, Genesis, Blockfi, and BitMEX facing a liquidity crisis.

“Not only were they not hedging anything, but they also evaporated billions in creditors’ funds,” Nik Bhatia, a finance professor at the University of Southern Carolina, said at that time.

Dubai tightens the regulatory screws

Experts have described VARA’s enforcement action against OPNX as a sign that the emirate is keen on protecting investors from unregulated market activity. Since announcing its intent to be the leading hub for digital currencies in the Middle East, several firms have moved to the city in search of regulatory approval.

Dubai’s regulators are also keen on clearing its name from the Financial Action Task Force’s gray list after failing to meet the minimum standards in uncovering illicit funds. In February, VARA announced full market regulations for virtual assets services providers, including stiff fines for infringement of the rules.

Watch BSV Stories – Episode 4: The Middle East’s Blockchain Race