(Bloomberg) -- Dubai authorities reprimanded the co-founders of failed crypto hedge fund Three Arrows Capital for operating and promoting their new digital-asset exchange OPNX without the required local license. 

Dubai’s Virtual Assets Regulatory Authority issued a written reprimand to Su Zhu and Kyle Davies, as well as OPNX’s two other co-founders and its chief executive, on April 18, according to a statement from the regulator. VARA said it will keep investigating OPNX’s activity “to assess further corrective measures that may be required.”

The action against OPNX is the latest sign of Dubai regulators taking a stricter approach toward crypto, even as the emirate attempts to position itself as a hub for the industry. That push coincides with broader efforts by the United Arab Emirates to get off the Financial Action Task Force’s “gray list” of jurisdictions that don’t do enough to uncover illicit funds, Bloomberg News reported in April.

Zhu and Davies started OPNX together with Mark Lamb and Sudhu Arumugam this year, marketing it as an exchange focused on trading crypto claims. The Three Arrows founders, who’ve spent months sparring with liquidators trying to recover money for creditors of their fallen fund, have made Dubai one of their main bases since its implosion last summer. They were previously based in Singapore. 

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Lamb and Arumugam, along with OPNX Chief Executive Officer Leslie Lamb, were also reprimanded by VARA, the watchdog said. Leslie Lamb said the firm hasn’t done any marketing targeting Dubai or the wider UAE. She said OPNX is cooperating with VARA’s investigation and doesn’t believe it violated any rules. 

“At no point in time have UAE customers been able to open an account on OPNX,” Leslie Lamb said in a WhatsApp message. 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 aren’t involved in day to day.” Mark Lamb and Arumugam didn’t immediately respond to requests for comment. 

VARA said it became aware in February that OPNX was soliciting customers for its yet-to-be-launched platform and collecting personal data. “Through social media platforms, OPNX had been engaged in marketing the exchange without establishing warranted restrictions for residents of Dubai/UAE,” the regulator said. 

The regulator said it issued a cease and desist order to the company and its founders on Feb. 27, followed by a second notice on March 10. OPNX then launched on April 4, according to VARA. A few days after that, VARA issued an “Investor and Marketplace Alert” regarding OPNX. 

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