Barely months after the collapse of Three Arrows Capital (3AC), founders Kyle Davies and Su Zhu’s new digital currency exchange OPNX have run into trouble with Dubai’s regulator.

In a public disclosure, the Dubai Virtual Assets Regulatory Authority (VARA) confirmed that it had placed fines on OPNX and its founders over violations of local rules. The virtual currency regulator announced a $2.6 million penalty against OPNX for engaging in promotional activities without seeking approvals.

Originally issued in May, VARA’s notice disclosed that the fine against OPNX remains unpaid. For their violations against rules on advertising and marketing, VARA issued a $53,000 fine against OPNX’s key executives, including CEO Leslie Lamb, Mark Lamb, Davies, and Zhu.

VARA noted that the four individuals in question have paid the fines against them but with the fine against OPNX remaining unpaid, VARA says it will be exploring “consequential actions.” The regulator’s statement disclosed that it will consider imposing further fines or refer the matter to the courts.

The virtual currency watchdog remarked that the decision to impose the fines are in line with its regulatory powers, receiving approval from its Grievance Committee.

“All fines noted above were referred to VARA’s Grievance Committee in accordance with due governance requirements,” said VARA. “The Committee reviewed the referral of the grievance and determined that the enforcement actions taken be upheld in their entirety.”

In early 2023, 3AC founders announced the launch of OPNX, a platform allowing users to tokenize legal claims and trade virtual currency futures. Dubai’s regulators got wind of the plan to float a new exchange and issued a cease-and-desist order against the firm for allegedly soliciting customers from Dubai’s residents.

VARA’s order was allegedly ignored, forcing the regulator to issue a public warning against OPNX and impose steep fines.

Since VARA’s creation in 2022, the regulator has taken a proactive approach toward virtual currencies in Dubai. Virtual asset service providers seeking to operate in Dubai are expected to obtain VARA’s approval, and lured by regularity clarity, global firms are trooping to Dubai to set up operations.

The fall of 3AC

At the height of its powers, Singaporean hedge fund 3AC controlled over $10 billion worth of assets before things began tearing at the seams. Experts have tagged the hedge fund’s implosion as “self-inflicted” rather than from market forces at play.

There is speculation that both founders used investors’ funds to purchase a $50 million yacht while dabbling in questionable investments. 

“In reality, their model was always a ticking time bomb and would have imploded eventually no matter what,” said Jonathan Zeppettini, an executive at Decred.