Three Arrows Capital has consistently been in the news for unpleasant reasons. The Singapore-based crypto hedge fund defaulted on its enormous loans to different crypto entities, resulting in liquidations and causing a devastating spiral effect on the markets. The co-founders recently spoke up after weeks of silence, blaming the firm’s woes on the Terra collapse and the failing markets of last month.
Su Zhu and Kyle Davies cited death threats as a reason for going into hiding
Following 3AC’s failure to repay its debt, a British Virgins Islands court, on June 29, ordered the liquidation of the hedge fund. In light of this, creditors had law firms represent them in the legal proceedings. However, 3AC’s founders Su Zhu and Kyle Davies reportedly failed to cooperate with the creditors’ lawyers, having gone into hiding with no word from them – at least until now.
As reported by Bloomberg, Zhu and Davies recently revealed that they had gone into hiding due to death threats, noting that their public silence did not mean that they weren’t discussing with the relevant authorities. “We have been communicating with them,” Zhu said in a telephone interview with Solitaire LLP lawyers.
Davies, acknowledging that their firm has triggered losses for many entities, noted that he and Zhu had not profited from the predicament, contrary to popular belief. Davies said they had put their savings into reviving the firm before its collapse.
Following the liquidation order, creditors filed paperwork that showed a combined value of $2.3B in debt. However, the papers indicate that this value is expected to increase.
Zhu said that their bet on Do Kwon’s LUNA project was one of the catalysts of their demise
“What we failed to realize was that Luna was capable of falling to effective zero in a matter of days,” Zhu said, noting that their bet on Do Kwon’s LUNA project was one of the main catalysts that influenced the hedge fund’s demise.
Zhu noted that they incurred massive losses due to trades with Terra’s LUNA and UST and that LUNA’s fall brought about a “credit squeeze” across the crypto space that mounted pressure on their illiquid positions. Zhu added that their trust in Do Kwon’s project was misplaced.
Zhu further mentioned that the nail in the coffin for them was the sharp plunge of BTC from $30k to $20k. According to Zhu, after LUNA collapsed with most of its funds, its creditors still permitted them to operate, indicating they were still comfortable with their “financial situation.” Still, the cold hands of the Crypto Winter on the markets further exacerbated their situation.
Data reveals that the hedge fund owes about 20 creditors a combined amount of $3.57B, the largest of which is a Singapore-based private company Genesis Asia Pacific. 3AC’s default resulted in a lot of fire sales by institutional investors in the space, further worsening the market conditions.
Zhu and Davies declined to reveal their current location during the interview, citing avoidance of further death threats. However, the duo noted plans to move to Dubai as originally discussed if the future does not hold something different for them.