The Last Cycle's Biggest Names Are Finally Facing Courtrooms

For once, the flood of familiar names back in the headlines carries some good news for the industry: the figures blamed for last year's blow-ups are starting to answer for them.

Do Kwon of Terra/LUNA and "highly profitable" trader Avraham Eisenberg have both already spent time in custody, and Celsius's Alex Mashinsky appears headed the same way.

As the last cycle's biggest promoters get marched past cameras and former customers, the spectacle risks reinforcing outsiders' view that this was always where crypto's bubble was headed. That's probably unavoidable. Still, clearing out the worst offenders is also a chance for the industry to reconnect with its founding principles.

3AC co-founder detained trying to leave Singapore

The "Zhupercycle" hit a milestone on Friday, when Three Arrows Capital co-founder Su Zhu was arrested as he tried to leave Singapore. He received a four-month sentence for failing to cooperate with liquidators handling the collapse of his fund. At minimum, authorities now know his location — whether he cooperates going forward is a separate matter.

A matching committal order has been filed against Zhu's business partner Kyle Davies, though officials say his current whereabouts are unknown. He is presumed to still be holed up somewhere without an extradition treaty.

SBF's trial opens days later, amid oddly sympathetic coverage

Zhu's arrest landed just before Sam Bankman-Fried's trial began. The former self-styled "would-be regulator" and self-confessed hypocrite stands accused of defrauding creditors of billions of dollars through the collapsed FTX exchange, with additional charges scheduled to be tried next year.

Watching him appear before a judge is satisfying to many, but mainstream media treatment has remained oddly forgiving — a steady run of pieces portray the 31-year-old as an overgrown kid who supposedly got in over his head while trying to do good. That framing sits alongside claims that FTX was a profitable enterprise, blurring the line between calculated fraud — gambling customer deposits on speculative tokens — and a bank run attributed to sloppy bookkeeping.

Exchanges are not banks: they are expected to back customer deposits 1:1 at all times, with a margin held in reserve for incidents like Lazarus Group intrusions. But Bankman-Fried has consistently undermined his own defense, projecting an image as the smartest person in any room and behaving as if rules didn't apply to him — a belief repeatedly disproven, including when his bail was revoked.

As proceedings got underway, the outlook for the defense looked poor: several of his closest associates are expected to testify against him, and he reportedly arrived late on the first day of his own trial. He also appears to be having difficulty financing his legal defense, prompting speculation he's tapping into reserve funds held back for exactly this situation.

Other jailed figures making headlines

Leaked Slack conversations attributed to Do Kwon reportedly contain striking self-incriminating material — darkly funny if it weren't tied to the harm his project's collapse caused the wider market. It's a fitting illustration of the crypto-era version of Hanlon's razor: never attribute to incompetence what is adequately explained by crime. Kwon remains detained in Montenegro on passport forgery charges, facing SEC pressure to sit for a deposition while extradition talks with the US and South Korea continue.

Earlier in the summer, cross-chain bridge Multichain suffered a collapse tied to losses exceeding $100 million, reportedly connected to the arrest of CEO Zhaojun, who it emerged held sole control of keys to a protocol marketed as decentralized. Separately, authorities have made at least 18 arrests linked to Hong Kong exchange JPEX, which may have exit-scammed after regulators warned of potential criminal action against the platform.

Who's still out there?

Kyle Davies remains at large and has gone quiet since his former partner's arrest. Former Alameda Research CEO Sam Trabucco, who sailed off before the FTX implosion, is reportedly expected to appear as a witness at Bankman-Fried's trial.

More arrests will likely follow before this bear market runs its course, clearing space for a fresh set of prominent figures — some of whom may eventually face similar consequences.

There's a risk that the public, watching these scandals unfold, will conflate custodial-platform fraud with the DeFi sector broadly, without recognizing the distinction. In reality, most of these cases trace back to centralized control and misplaced trust in individuals — outcomes that could not have occurred within properly decentralized systems.

Public perception may stay damaged for a while, but the only way to shift it is by proving a more reliable model works. With trust in traditional finance at historic lows amid ongoing macro turmoil, DeFi has a genuine opening to demonstrate it can do better — regulatory pressure and scrutiny notwithstanding. Whether the industry seizes that opportunity remains to be seen.