The founders of the now insolvent Three Arrows Capital (3AC) Su Zhu and Kyle Davies have broken the silence in an interview with Bloomberg. After almost five weeks in hiding, the disgraced founders gave an extensive interview about the implosion of their once very successful hedge fund, saying “their bungled crypto speculation unleashed cascading margin calls on loans that should have never been made.”
Zhu and Davies To Settle in Dubai
Per the report, the pair has described the collapse of 3AC as “regrettable,” but has vehemently denied any claims that they pulled money from the fund prior to its collapse. On the face of it, 3AC’s collapse was triggered by the fall of the Terra ecosystems that sent shock waves through the entire crypto market, and investors are claiming that the fund still owes them a whopping $2.8 billion. On Monday, the 18th of July, a court report revealed the full extent of 3AC’s debt following its collapse, with individual claims worth over $1 billion. The founders are still mum on the exact whereabouts, saying that they have received numerous death threats, but one attorney on the call said their ultimate destination is the United Arab Emirates. Zu added,
Given that we had planned to move the business to Dubai, we have to go there soon to assess whether we move there as originally planned or if the future holds something different for us.
Confluence Of Interrelated One-Way Bets And Borrowing Arrangements Blew Up At Once
In the report, Zhu said the reason for the fund’s demise was making leveraged trades with the hope that the crypto market would rebound to its former upside after many years of a bull run.
Zhu said,
We positioned ourselves for a kind of market that didn’t end up happening.
Davies added,
We believed in everything to the fullest. We had all of our, almost all of our assets in there. And then in the good times we did the best. And then in the bad times we lost the most.
The due say that at the same time, they aren’t outliers. They describe a confluence of interrelated one-way bets and borrowing arrangements that all blew up at once, leading to only their demise, but to the bankruptcy, distress, and bailouts at firms like Celsius, Voyager Digital, and BlockFi.
Zhu said,
It’s not a surprise that Celsius, ourselves, these kind of firms, all have problems at the same time. We have our own capital, we have our own balance sheet, but then we also take in deposits from these lenders and then we generate yield on them. So if we’re in the business of taking in deposits and then generating yield, then that, you know, means we end up doing similar trades.
The pair insist they are cooperating with the relevant authorities while at the same time trying to maintain a low profile.
For Kyle and I, there’s so many crazy people in crypto that kind of made death threats or all this kind of noise. We feel that it’s just the interest for everyone if we can be physically secured and keep a low profile.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
