The disgraced founders of Three Arrows Capital discussed the catastrophic collapse of their once-promising hedge fund after spending five weeks in hiding. They claimed their botched cryptocurrency speculation had set off cascading margin calls on loans that should have never been taken.
Kyle Davies and Su Zhu, both 35, first grew close in high school. They turned 3AC into a crypto trading titan before its demise forced creditors into bankruptcy and accelerated a selloff that caused mom and pop owners of Bitcoin and other tokens to suffer significant losses.
Speaking from an unidentified location, Davies and Zhu outlined a systemic failure of risk management in which the impact of wrong-way bets was made worse by easy access to credit. They were alternately remorseful and defensive.
According to co-founders Zhu Su and Kyle Davies, Three Arrows Capital had prepared for a market that “didn’t end up happening,” and “the whole thing is terrible.”
To avoid the “weird individuals in crypto that kind of issued death threats,” the pair are traveling to Dubai.
What Else Did The Founders Say?
Co-founders Zhu Su and Kyle Davies told Bloomberg in an interview published today that Three Arrows Capital had prepared for a market that “didn’t end up happening” and that “the whole scenario is regretful.” They also mentioned that they are on their way to Dubai.
According to Davies, the entire scenario is unfortunate. “A lot of people lost money.”
“We set ourselves up for a market that ultimately didn’t materialize,” said Zhu.
Before imploding in May as a result of the failure of the Terra ecosystem and its associated luna token, 3AC had grown to handle billions of dollars as one of the most well-known hedge funds in cryptocurrency. This month, the fund filed for bankruptcy. 3AC owed 27 crypto firms $3.5 billion, according to court documents initially published Monday by 3AC’s liquidators before being removed.
In the interview, the creators discussed how investments on Luna, the Grayscale Bitcoin Trust, and staked ether failed.
“We didn’t understand that luna might effectively plummet to zero in a matter of days,” added Zhu.
The two refused to specify their location but claimed to be traveling to Dubai, from which they intend to oversee 3AC’s liquidation.
“For Kyle and I, many weird people in crypto have threatened us with death or made other forms of commotion,” Zhu added. “We believe maintaining a low profile and physical security is in everyone’s best interest.”