The Tale of 3 Crypto CEOs

BeInCrypto takes a look at three high-profile crypto company collapses this year and what became of their CEOs.

TerraUSD Collapse

The collapse of the Terra ecosystem earlier this year has been cited as one of the defining events of the crypto winter.

It started on May 7, when Terraform Labs withdrew 150 million TerraUSD (UST) from 3pool, a liquidity pool on decentralized exchange Curve Finance.

Although the withdrawal was planned, 3pool’s volatility increased significantly in preparation for the deployment of the 4pool liquidity pool.

A couple of traders noticed the withdrawal, collectively exchanging another 185 million UST for rival stablecoin USDC, further increasing volatility. In response, Terraform Labs withdrew another 100 million UST from 3pool, to “balance” its share of UST. This later led to the algorithmic stablecoin losing parity with the dollar.

In an effort to stabilize UST, holders converted about $480 million of stablecoin Tether on May 8 and 9. In addition, the Luna Foundation Guard, established previously as reserves, sold billions of dollars worth of Bitcoin to convert to UST.

However, the reserves were depleted the next day, but the stablecoin continued to weaken, leading to its demise.

Crypto CEOs: Do Kwon on the Run?

Many have blamed the collapse on the former head of Terraform Labs, Do Kwon. These include his doomed attempt to drive liquidity away from 3pool to the potential 4pool he had proclaimed. “The aim is to starve out the 3 pool. [It] won’t last long,” Kwon had said.

After the spin-off, Kwon pitched to investors, assuring them that Terraform Labs would restore UST’s value.

Yet, while efforts were being made to do so, analysts revealed that Kwon was actually withdrawing money. As public sentiment turned against Kwon, Interpol issued a red notice against him, his funds were reportedly frozen, and he reportedly fled his last known location in Singapore.

Kwon maintains his innocence and says he is not hiding, but refuses to reveal his location out of concern for his safety. While his current whereabouts are unknown, there are speculations that he is in Dubai.

Three arrows Capital collapse

The Terra collapse then contributed to the downfall of another industry titan, Three Arrows Capital. Although the firm had some credibility, after a decade of existence, the business proved unsustainable. 3AC was revealed to have taken funds it had been loaned to further invest in other crypto projects. Terra had been one of those investments, and its demise triggered a domino effect across the industry.

Frightened investors then withdrew their funds through a series of margin calls that 3AC proved unable to meet. 3AC was then ordered to liquidate its capital investments, and subsequently filed for bankruptcy.

3AC had a long list of counterparties, or companies that had their money wrapped up in the firm’s investments. With the company’s rapid insolvency, many of these firms also faced liquidity problems.

Crypto bosses: 3AC founders disappear

Amidst the litigation surrounding 3AC’s bankruptcy, co-founder and CEO Su Zhu was reportedly uncooperative and continued to make himself scarce.

Despite issuing a statement expressing its intention to cooperate with “relevant parties,” after the issuance of a subpoena, Zhu’s whereabouts were reportedly unknown. BeInCrypto reported that Zhu and co-founders Kyle Davis and Su Zhu had ordered the company’s Singapore offices to be vacated, while using evasive tactics such as “muting audio and video” in a Zoom call.

Weeks after they disappeared, the pair reappeared briefly to give their view of what had happened. They denied allegations of running away with investors’ funds, adding that the whole situation was “regrettable”. Like Kwon, they cited personal safety as a reason for their disappearance. From yesterday, Zhu posted on Twitter for the first time in months, detailing the personal recovery he has been working towards.

SBF down for the count

Now Sam Bankman-Fried, formerly the golden child of the crypto industry, is the latest CEO to go through the twist. Ironically, he had considered taking on assets for the beleaguered 3AC through his crypto exchange FTX.

However, questions of impropriety regarding the exchange’s close relationship with his other firm Alameda Research dogged Bankman-Fried.

Earlier this week, Binance CEO Chengpeng Zhao said the exchange would liquidate FTX tokens (FTT) from its books. This was revealed to be due to concerns over the solvency of Alameda, whose FTT holdings accounted for over a third of its $14.6 billion in assets.

While SBF did its best to refute this claim, this triggered a mass liquidation of FTT, leading to a liquidity crisis for the firm.

Within hours, Zhao said Binance would buy FTX, pending due diligence. Doubts about FTX’s stability persisted, however, and it is now unclear when Binance will follow through on the acquisition.

According to the latest developments, US authorities said they would launch an investigation into Bankman-Fried’s operations.

Disclaimer

All information on our website is published in good faith and for general information purposes only. Any action the reader takes on the information contained on our website is strictly at their own risk.