all about cryptop referances
This week, the two co-founders of controversial cryptocurrency hedge fund Three Arrows Capital spoke to Bloomberg about their fund falling apart at the seams. Co-founders Su Zhu and Kyle Davies did not reveal their whereabouts, but a lawyer who oversaw the interview noted that the duo is in the United Arab Emirates. Zhu said he would “perhaps” accept being called “stupid,” but people saying he “dismissed funds during the last period” are “not true.”
The crypto hedge fund Three Arrows Capital Ltd. (3AC) founded by Su Zhu and Kyle Davies has been a rallying point in the crypto industry for the past couple of weeks since reports in mid-June noted that the fund was insolvent.
The 15th of June Zhu tweeted “We are in the process of communicating with relevant parties and are fully committed to finding this out,” but at the time no one knew exactly what he meant. Further reports have shown that the crypto fund’s leveraged positions were liquidated by a number of exchanges.
Reports had also revealed that 3AC owed Voyager Digital $655 million, and days later a court in the British Virgin Islands ordered that 3AC’s assets be targeted for formal liquidation. By the first week of July, 3AC filed for bankruptcy protection, utilizing the Chapter 15 process to protect the company’s assets in the United States.
Amid all the chaos surrounding the company, the two co-founders had not been forthcoming about the situation, and no one was sure of the duo’s whereabouts. This week, the 3AC founders decided to do an interview with Bloomberg, and Zhu and Davies gave the interviewer a more descriptive account of their history.
The two acknowledged that the company’s fallout spread like a contagion throughout the crypto industry, and they deny any attempt to siphon funds from the company’s coffers before the full collapse.
Zhu said the company’s executives suffered significant personal losses in an attempt to save the sinking ship. “People may call us stupid,” Zhu noted. “They can call us stupid or delusional. And I’ll accept that. Maybe,” Zhu said. “But they’re going to say I ran away from funds over the last period, where I actually put more of my personal money back in. That’s not true.”
On July 8, reports noted that Zhu and Davies were in hiding and allegedly uncooperative. However, Zhu admits that the founders have been forced into hiding because they received death threats.
“That doesn’t mean we haven’t communicated with all relevant authorities,” the 3AC co-founder told Bloomberg. “We’ve been communicating with them from day one,” he added. Davies stressed that the whole ordeal was unfortunate and the duo are aware that many people lost money. Davies noted:
The whole situation is deplorable. Many lost a lot of money.
The 3AC founders explained that before the collapse they were extraordinarily bullish and had put a number of trades on leverage and expected a market reversal. “We positioned ourselves for a kind of market that didn’t end up happening,” Zhu said during the interview.
Interestingly, before the company’s fallout, Zhu talked about being careful with “reasonable amounts of influence,” and he told people that “you don’t want to overestimate your ability to do things.” Furthermore, Zhu stated at the time that crypto traders “will not be blown out during a supercycle.” When we talked about the situation this week, Davies said the hedge fund did very well when the crypto cycle was good. Davies said:
We believed in everything to the fullest. We had all our…almost all our belongings in there. And then in the good times we did the best. And then in the bad times we lost the most.
Zhu also discussed other crypto firms such as Celsius, a crypto lender that has been dealing with financial issues and bankruptcy proceedings. “It’s not a surprise that Celsius, ourselves, these types of firms, all have problems at the same time,” the 3AC boss said. “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 a return on them. So if we’re in the business of taking deposits and then generating returns, that means, you know, we end up doing similar trades.”
The 3AC boss also pointed to the speculation and allegations that Zhu and Davies lived extravagant lifestyles, and he said the company’s yacht was bought last year and has a “full money trail.” Zhu noted that he only had two homes in Singapore and that he regularly cycled to work and lived frugally.
“We have never seen any clubs that spend a lot of money. We were never seen, you know, in a way that drove Ferraris and Lamborghinis around,” Zhu explained. “This kind of smearing of us, I feel, is just from a classic playbook of, you know, when things like this happen, when funds blow up, then, you know, these are the kinds of headlines that people like to play.”
Towards the end of the interview with Zhu and Davies, the 3AC co-founders discussed how they were caught off guard by Terra UST and the LUNA blowout. The hedge fund invested millions of dollars in the Terra ecosystem, and now those funds are almost worthless.
“What we didn’t realize was that Luna was capable of falling to effective zero in a matter of days, and that this would catalyze a credit crunch in the industry that would put significant pressure on all of our illiquid positions,” Zhu said. The 3AC co-founder added that the team may have been too fond of Terra’s co-founder Do Kwon. Zhu concluded:
We started to know Do Kwon on a personal basis when he moved to Singapore. And we just felt that the project was going to do very big things, and had already done very big things. If we could have seen that, you know, that this was now, potentially attackable in some ways, and that it had also grown, you know, too big, too fast.
Terra’s Do Kwon has come under a lot of criticism over the past few months as well, being accused of some shady dealings such as allegedly paying out $2.7 billion before the blockchain fallout. Like Davies and Zhu, Kwon recently did an interview for the first time since Terra’s collapse and noted that he was “devastated” by the ordeal.
Kwon further emphasized that there is a big “difference between failure and fraud”, as he denies any wrongdoing. Kwon accepted that he put a lot of faith in Terra’s LUNA as it grew massively and that he believed it was capable of greatness.
What do you think of the interview with Davies and Zhu from Three Arrows Capital? Let us know what you think about this topic in the comments section below.
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