Since filing bankruptcy, the troubled hedge fund’s co-founders have recounted its sad demise for the first time.
The 3AC Co-Founders Break Silence
The co-founders of Three Arrows Capital have begun chatting.
In a Friday interview with Bloomberg, Su Zhu and Kyle Davies, the high school pals behind what was once one of the largest crypto funds, discussed their company’s difficulties.
The present whereabouts of Zhu and Davies are unclear, and the interview indicated that they are en route to Dubai. The pair have received death threats in recent weeks after a judge in the British Virgin Islands ordered 3AC to sell its assets and declare bankruptcy last month.
A leaked 1,000-page document from the Singapore High Court has helped shed light on 3AC’s bankruptcy. Several of the fund’s creditors claimed in the paper that Zhu and Davies severed communication with them after presenting them with legal actions demanding their attention. Now, the pair seems pressured to step out and explain their side of the story.
During the extensive interview, Zhu and Davies disclosed that they had underestimated the market by leveraging their long holdings to achieve maximum exposure to what they expected would be a crypto Supercycle.
However, once the unexpected collapse of the Terra ecosystem caused an estimated $600 million hit to the company’s financial sheet, things began to deteriorate rapidly.
As the Terra crash rattled the crypto market, a chain reaction of sell-offs and liquidations ensued, endangering 3AC’s other assets. Certain market players were pursuing the firm’s leveraged long position on staked ETH to force liquidation and drive down prices.
3AC’s Grayscale Bitcoin Trust (GBTC) arbitrage transaction resulted in a loss on its Bitcoin holdings when GBTC’s premium turned into a discount. As Bitcoin fell below its previous cycle’s peak in mid-June, these so-called “risk-free” transactions, formerly the firm’s leading source of revenue, drove it to the verge of collapse.
A significant portion of the conversation was on Zhu and Davies clearing their identities of many alleged transgressions. As 3AC struggled with bankruptcy, the duo refuted allegations that they had evaded creditors’ correspondence. “We have been communicating with them from day one,” said Zhu.
In addition, Zhu addressed allegations that he and Davies concealed cash from liquidators in private accounts. People may refer to him as dumb, idiot or crazy. “And, I’ll accept that. Maybe,” he said. “But they’re gonna, you know, say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true.”
While it would likely take months, if not years, for 3AC and its creditors to reach an arrangement, Zhu and Davies have expressed their desire to help as much as possible.
The 3AC issue has havoc on the whole cryptocurrency business. After 3AC failed on their payments, it was reported last week that Genesis Trading had financed the company over $2.36 billion, while BlockFi, Voyager Digital, and Celsius are all suffering big losses. In the last several weeks, both Voyager and Celsius have filed for Chapter 11 bankruptcy.
