Two of Three Arrows Capital’s (3AC) founders, who have been in hiding for the last five weeks, have spoken out about the stunning collapse of their once-promising crypto hedge fund.
Su Zhu and Kyle Davies, claim that their botched crypto speculation triggered cascading margin calls on loans that should never have been issued in the first place, according to a Bloomberg report on July 22.
The two 35-year-olds had turned 3AC into a crypto trading giant before its collapse, bankrupting creditors and accelerating a selloff that forced investors of Bitcoin and other tokens to take significant losses.
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They admitted that the collapse caused considerable suffering, but for the most part, they avoided inquiries about the impact it had on those working in related industries. Instead, they emphasized the significant losses they had incurred while disputing the charges that they had taken money out of 3AC before everything went wrong.
Zhu said:
“People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe. 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.”
Zhu claims they are communicating with authorities
In documents filed on July 8, the advisers in charge of liquidating the fund said that Zhu and Davies had not cooperated with them and that the location of the firm’s founders was unknown. Zhu said they were obliged to go into hiding because they had received death threats.
Zhu added during a telephone conversation with Davies and two attorneys from Solitaire LLP, “that does not mean that we haven’t been communicating with all relevant authorities. We have been communicating with them from day one.”
“The whole situation is regrettable. Many people lost a lot of money,” Davies added.
3AC founders refuse to reveal their location
The two individuals refused to reveal their current location. Still, one of the attorneys who participated in the conversation speculated that their ultimate destination was the United Arab Emirates, which has recently emerged as a hub for cryptocurrency activity.
They detail a convergence of interconnected one-way bets and accommodating financing arrangements that all blew up at the same time, resulting not only in the failure of their fund but also in the insolvency, distress, and bailouts of companies such as Celsius Network, Voyager Digital, and BlockFi.
This week, charges were made by creditors that the fund’s founders placed a down payment on a yacht worth $50 million before the fund failed. Zhu has said that these claims are part of a conspiracy to tarnish the firm’s reputation.
According to Zhu, the boat “was bought over a year ago and commissioned to be built and to be used in Europe,” Zhu said, adding the yacht “has a full money trail.” He also refuted the notion that he led a lavish lifestyle by pointing out that he rode his bike to and from work every day and that his family “only has two homes in Singapore.”
Finally, in answer to questions about what went wrong at the company, Zhu noted overconfidence that was born of a multiyear bull market that permeated not only him and Davies but practically all of the industry’s credit infrastructure, where crypto lenders saw their values increase as a result of funding enterprises such as theirs.
