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Three Arrows Capital in the Eyes of Others: Domineering and Hiding in Tibet

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Zhu Su showed pictures of the $50 million yacht at the party, saying it would be "bigger than the yachts in the homes of all the billionaires in Singapore".

Original title: "The Crypto Geniuses Who Vaporized a Trillion Dollars"

Original source: The New York Times

Original author: Jen Wieczner

Original compilation: Kxp, BlockBeats

This is a snow-white yacht weighing about 500 tons and 171 feet long, made of glass and steel. Its future captain showed pictures of the $50 million yacht at a party, saying it would be "bigger than the yachts in the homes of all the billionaires in Singapore". He intends to decorate the cabin with projection screens while building a water gallery for his NFT collection. The buyer of the superyacht, the largest ever sold by veteran shipbuilder Sanlorenzo in Asia, has a clever name for it: Much Wow.

The buyers of this yacht - Su Zhu and Kyle Davies, are two from Ann Dover graduates, the two run a Crypto hedge fund company called Three Arrows Capital in Singapore. But the duo filed for bankruptcy in July after buying the yacht and disappeared before the final payment was made, leaving the unclaimed yacht at a berth off the coast of Italy. While it has not yet been officially listed for resale, dealerships have been secretly informed that the Sanlorenzo-built yacht is back on the market.

The yacht has since become the source of countless memes and memes on Twitter. Countless Crypto holders, practitioners and investors have seen the news of the bankruptcy of Three Arrows Capital through Twitter, the Crypto function center, and they are all shocked and saddened by the demise of the most high-profile investment fund company in the global emerging financial industry . The company's demise was not just due to the recklessness of the two founders, but also to potential criminal activities. Either way, it created a cascade of ill effects that not only led to a historic sell-off in Bitcoin and its ilk, but also devastated the crypto industry as a whole.

Crypto companies in New York and Singapore were direct victims of the Sanjian bankruptcy. Voyager Digital, a publicly traded New York-based crypto exchange once valued in the billions, filed for Chapter 11 bankruptcy protection in July, saying it was owed more than $650 million by Three Arrows. Genesis Global Trading, headquartered on Park Avenue, once lent US$2.3 billion to Three Arrows; similarly, Blockchain.com was a Crypto company that provided digital wallets in the early days, and later gradually developed into an exchange. It also has US$270 million from Three Arrows Capital. outstanding loans and has laid off a quarter of its staff as a result.

Crypto industry insiders generally believe that Sanjian Capital is important for the large-scale collapse of Crypto in 2022 Liability, market chaos and forced sales sent Bitcoin and other digital assets plummeting more than 70%, wiping out more than a trillion dollars in value. "I think 80% of the mistakes are made by two people," Sam Bankman-Fried said. As CEO of FTX, he bailed out a bunch of bankrupt lenders and probably understands these problems better than anyone. "They're not the only ones who are doing bad things, but they're far greater than others. What's more, they have gained more trust in the ecosystem before than others."

3AC’s CEO Zhu told Bloomberg in February that “we don’t have any external investors,” but the actual Up, Sanjian caused staggering losses. As of mid-July, creditors have filed claims of more than $2.8 billion, and I expect that number to rise. Everyone in Crypto, from lenders to investors, seems to have lent their digital coins to 3AC, and even 3AC’s own employees, who deposit their wages into the company’s “lending platform” in exchange for interest. “A lot of people are disappointed by this,” said Alex Svanevik, CEO of Nansen, a Singapore-based blockchain analysis company. “They shouldn’t have done it because they’ve tricked a lot of people into giving them money.”

The money seems to have disappeared now, along with the assets of several affiliated funds and 3AC managed Partial funding of various Crypto projects. For the many crypto startups that park their funds with the firm, publicly disclosing their ties to Sanjian increases the risk of heightened scrutiny from their investors and regulators. (Because of this, and the legal complexities of being a creditor, many who spoke about their experiences with 3AC requested anonymity)

At the same time, this unclaimed yacht is really a little pathetic, all of which are the result of the arrogance, greed, and recklessness of the company's co-founder. Zhu and Davies are currently in hiding and cannot be contacted at all. Crypto has been controversial, saying that its core is a scam-now, Three Arrows Capital is in the arms of these people.

Pictures of Zhu and Davies in their senior year at Andover in 2005

Zhu and Davies Originally two ambitious, very smart young men who understood the Crypto market: Su Zhu and Kyle Davies met at Phillips Academy in Andover, MA, the same week they started high school as 9/11 class of students. While many of the kids at Andover, a top-ranked boarding school, come from wealthy families, both Zhu and Davies hail from suburban Boston. “None of our parents were rich,” Davies said in an interview last year. “We both came from the middle class.” They weren’t particularly popular at school either, with a classmate saying of the pair: “Everyone I think they are a bit different, especially Su, I actually think they just don't like to deal with classmates."

Zhu immigrated to the United States with his family when he was 6 years old. He did well in school and won a hard work award in his grade yearbook. Not only that, he is also quite accomplished in mathematics and literature. "Su was the smartest guy in our class," recalls a classmate.

Davies is the star of the crew, but in the minds of his classmates, he is actually the marginal figures. Davies was particularly fond of Japanese culture, but his relationship with Zhu wasn't that good at the time. “We went to high school together, we went to college together, we got our first jobs together, but we became good friends later on,” he said on a Crypto podcast in 2021. “I didn’t know that much in high school. He, he just knew that he was very smart, so he often hung out together when he was in college."

The two of them Both got into Columbia University, took a lot of math-related courses, and both joined the squash team. Zhu graduated a year early with honors and moved to Tokyo to do derivatives trading at Credit Suisse, while Davies followed him as an intern, sitting next to each other's desks. Zhu was later fired due to the financial crisis and moved to a high-frequency trading firm in Singapore called Flow Traders.

Zhu came into contact with arbitrage there, and became more and more familiar with it, which also gave him a lot of confidence. Later, he was able to outright criticize his colleagues and even his boss. Due to the high temperature in the office, Zhu is also the only one who works in the office topless.

After leaving Flow, in order to follow Crypto legend, BitMEX exchange co-founder Arthur Hayes Footsteps, Zhu worked for a while at Deutsche Bank. Davies stayed at Credit Suisse, but by then both were tired of life at the big banks. Zhu complained to acquaintances about the low standard of his bank colleagues and disliked the company culture at the time. In his view, the best people either went to hedge funds or have started their own businesses. So he and Davies, now 24, decided to start their own business. "There's no harm in leaving," Davies explained in an interview last year. "Even if we didn't do our last job well and left, we'd definitely find another."

In 2012, the two used their working savings, plus money borrowed from their parents, to raise about 100 million for Three Arrows Capital. million in seed funding. The name comes from a Japanese legend: a prominent daimyo taught his son that it was easy to break one arrow, but impossible to break three at once.

Davies said on the UpOnly podcast that in less than two months, they funding doubled. The duo soon headed to Singapore, where there is no capital gains tax. In 2013, they registered the fund company there and planned to give up their American passports and become Singaporean citizens. Zhu's good command of both Chinese and English has allowed him to navigate Singapore's social scene with ease, occasionally organizing poker games and exhibition chess tournaments with Davies. However, they have also been frustrated by their inability to get Sanjian to the next investment stage. At a dinner party around 2015, Davies lamented to another trader the difficulty of raising capital, and the trader wasn’t surprised — after all, Zhu and Davies had no background and no track record.

In its early stage, Three Arrow Capital focused on arbitrage of foreign exchange derivatives in emerging markets—— A financial product linked to the future price of a small denomination currency such as the Thai baht or Indonesian rupiah. “Trading these types of financial products often requires strong relationships with big banks, so it is difficult for ordinary people to enter these markets,” BitMEX’s Hayes wrote in a recent Medium article, “So I am very impressed with Su and Kyle. .”

At that time, foreign exchange transactions continued to go electronic, so it was easy for traders to find the differences between different bank quotes, that is, spread. Spotting this sweet spot, Three Arrows began poking around at quotes and using them to make a few tenths of a cent on every dollar traded. This behavior disgusted the banks, as Zhu and Davies were essentially poaching funds that the institutions could have kept. Sometimes, when the banks realized they had quoted Three Arrows the wrong price, they would ask to amend or cancel the deal, but Zhu and Davies would not back down. Last year, Zhu tweeted a photo from 2012, smiling across 11 screens in front of him. He tweeted about their FX trading strategy of picking out bad bids from banks.

In 2017, banks started cutting ties with them. "Whenever Three Arrows asked for a quote, all the bank FX traders said, 'We're not going to quote these two guys,'" said a former trader who was Three Arrows' counterparty. Recently, foreign exchange traders who knew about Sanjian at an early stage felt gloated after knowing that Sanjian had collapsed. “We the forex traders are partly responsible for this because we know these guys can’t make money in forex,” said the former trader, “but when they got into crypto, everyone thought they were geniuses.”

On May 5, 2021, Three Arrows was at the peak of its development, and Zhu tweeted an early photo of the company in 2012, when he and Davies were in a Forex trading in a two-bedroom apartment. There was an implicit message in the tweet: It's been amazing how we've grown into a multi-billion dollar company.

From the current point of view, Crypto has been in an extreme but roughly regular cycle. In Bitcoin’s 13-year history, the 2018 bear market was arguably the toughest period. After hitting an all-time high of $20,000 in late 2017, Bitcoin crashed to $3,000 at one point, dragging down thousands of smaller coins on the market. It was against this background that Three Arrows turned its focus to Crypto and started investing at such an appropriate time. In the days to come, such an achievement would look glamorous to the many Crypto novices, and even industry insiders, who followed Zhu and Davies on Twitter. However, we have to admit that there is an element of luck, after all, Sanjian just wanted to find a new field.

With the increase of Crypto transactions around the world, the company's experience in arbitrage immediately It came in handy. They used the famous "kimchi premium" trading strategy: first buy Bitcoin in the United States or China, and then sell it at a higher price in South Korea, because the exchanges in South Korea are more strictly regulated, the price naturally goes up, so that they can make money. Take the difference in the middle. At that time, there were many successful cases like this, and they all made a lot of money. The company told investors that it operates a low-risk strategy designed to make money during both bull and bear markets.

Another arbitrage method is: buy Bitcoin at the spot price and sell Bitcoin futures at the same time , or vice versa, to earn a price premium. "The investment objective of the Fund is to achieve a stable market-neutral return while preserving capital," reads 3AC's official document. Of course, under this kind of hedging operation, no matter how the market changes, the investment loss will not be too large. However, hedging strategies also require large sums of money when used on a large scale, so Three Arrows began to borrow money from outsiders. If all goes well, the strategy could generate profits well in excess of the interest on its loans. As a result, the two continued to expand the fund pool and borrow more money.

In addition to large borrowings, the company also uses social media to increase its influence. In the Crypto space, Twitter is the only major platform. Many of the key players in an industry that has become global are actually hiding behind anonymous or pseudo-anonymous Twitter accounts, with cartoon profile pictures. In an unregulated market environment where there are no traditional institutions and transactions are conducted around the clock, Twitter has become a platform for gathering Crypto figures, as well as a communication center for market information and opinions.

Zhu and Davies ended up at the top of the Crypto scene on Twitter. According to friends, Zhu had always planned to become a “Twitter celebrity,” which required prolific tweeting, wildly bullish prophecies to pander to popular expectations, and amassing a massive following. In doing so, he can ride the tide and become the top predator on CryptoTwitter, trading other people's interests for his own.

By promoting the Crypto "supercycle" theory, Zhu gained 570,000 followers. He predicts a year-long bull run for Bitcoin, with prices rising into the millions of dollars per coin. Zhu keeps emphasizing on the platform and on the Crypto podcast and video shows that people should get in early, and that the super cycle will make you a lot of money one day.

“They used to boast that they could borrow as much as they wanted,” said one "Everything was planned, from the way they built their credibility to the structure of the fund," said a former trader who knew them in Singapore.

These guys didn't make money in Forex, but when they came to Crypto, everyone thought they were geniuses.

With the growth of Sanjian, the company no longer stops at Bitcoin, and begins to enter a series of start-ups Crypto projects and many unknown Crypto. The company seems to be indiscriminate about these projects, almost treating them as a kind of charity. Earlier this year, Davies said on Twitter: "It doesn't matter what VCs invest in, it's good for the industry to have more fiat in the system." Chris Burniske, founding partner of venture capital firm Placeholder, said: "They are obviously investing in a random direction and pure luck."

Some investors recall sensing that something was amiss with Sanjian back in 2019. That year, the fund began to reach out to peers in the industry: 3AC had invested in a Crypto options exchange called Deribit, and transaction information showed that Deribit’s market value was $700 million. But some investors noticed that the valuation seemed inaccurate and found that it was only worth $280 million. It turns out that the reason Three Arrows sold some of its investments at a premium was to get kickbacks. In venture capital, this is a disgraceful thing to do, and the operation left outside investors and Deribit itself dumbfounded. "From then on, I basically distanced myself from them and didn't want to do business with them," said David Fauchier, a portfolio manager at Nickel Digital Asset Management.

But the company is thriving, and amid COVID-19, as the Federal Reserve pumps more money into the market and U.S. authorities issue stimulus checks, the Crypto market is primed to Here comes the rise for several months in a row. By the end of 2020, Bitcoin was up 5x from its March lows. To many, this looks like a super cycle. Three Arrows’ annual report shows returns on investments in its main funds of more than 5,900%. It ended the year with more than $2.6 billion in assets and $1.9 billion in liabilities.

One of 3AC's largest positions, and one that has the greatest impact on its fate, is GBTC (Grayscale Bitcoin Trust). The firm has returned to its old roots of arbitrage profits, amassing as much as $2 billion in GBTC. At the time, it was trading at a premium to regular Bitcoin, and 3AC was happy to pocket the difference. On Twitter, Zhu often promotes GBTC and calls on everyone to buy it.

Zhu and Davies' public personas have become more extreme and their tweets more and more Pompous. A former friend of the two said: "The two have little sympathy for most people, especially ordinary people with little wealth."

The employee turnover rate of Sanjian Company is very high. The traders who left said that they would not be rewarded for their good performance in the company, but would be deducted for doing something wrong. salary. (Though, 3AC traders are still in high demand in the industry; Steve Cohen's hedge fund, Point72, was interviewing 3AC's team of traders before the fund collapsed).

Zhu and Davies have kept the inner workings of the company secret and only the two of them can To move funds between these Crypto wallets, most Three Arrows employees have no idea how much money the company manages. While employees complained about the long hours, Zhu was reluctant to hire new people, fearing they would "give away trade secrets." In Zhu's view, Three Arrows is a help to anyone who works for it. The friend added, "Zhu feels they provide valuable learning opportunities for their employees and should be rewarded instead."

Even though they haven't reached billionaire status yet, Zhu and Davies have started buying some super luxury items to treat themselves. In September 2020, Zhu bought a $20 million mansion, known in Singapore as a "high-end bungalow," in his wife's name. The following year, he bought another in his daughter's name, worth $35 million (according to their friends, after becoming a Singapore citizen, Davies also bought a high-end mansion, but the house is still being renovated, and he has not move in).

While Zhu and Davies are becoming obsessed with their wealth, Three Arrows is also constantly borrow money. Since DeFi projects can offer depositors much higher interest rates than traditional banks, the lending craze has become mainstream in the Crypto industry. When lenders asked Three Arrows for collateral, it often shied away. Instead, it offered to pay interest rates of 10% or more, higher than any competitor was offering. Because of its “gold standard” reputation, some lenders don’t ask for audited financial statements or any documentation at all, as one trader put it. Even large, well-capitalized, professionally run Crypto companies were lending large amounts of unsecured money to 3AC, including Voyager, which eventually went bankrupt.

For other investors, Three Arrows' hunger for cash is another warning sign . In early 2021, the Warbler Capital fund is poised to raise $20 million in funding, with a strategy primarily of outsourcing capital to 3AC. In response, Matt Walsh, co-founder of Castle Island Ventures, said he couldn't understand why a multi-billion-dollar foundation like Three Arrows would accept such a small sum of money. "It was a wake-up call for us that maybe these guys were out of business," Walsh recalled.

The troubles seem to have started last year, and Three Arrows' huge bet on GBTC is at the crux of the matter. Just as the company was rewarded when there was a premium, it also suffered when GBTC started trading at a discount to Bitcoin. The reason why GBTC has a premium is due to the original uniqueness of the product - it allows you to acquire Bitcoin in an easy way. As more and more people flock to the trade, new alternatives appear, and this premium ceases to exist, or even becomes negative. But many smart market players have seen this, said a trader and former colleague of Zhu's: "All arbitrage is going to collapse someday."

Davies is aware of the risk this poses to Three Arrows and in September 2020 by Castle Island. But before the show aired, Davies asked to cut the clip, and the company obliged. While unwinding the position was tricky, Zhu and Davies actually had a chance to get out. However, they did not do so.

Fauchier said: "They had ample chance to get away with it. I really Didn’t think they’d be stupid enough to do it with their own money. I don’t know what they’ve been up to.” Company colleagues say Three Arrows is holding on to GBTC because it’s betting that the SEC will approve GBTC’s transfer to a trading fund long-term conversion, making it more liquid and tradable, and potentially eliminating Bitcoin's price mismatch. But in June, the SEC rejected GBTC’s application.

In the spring of 2021, GBTC has fallen below the value of its Bitcoin, and Three Arrows has also There have been losses on its biggest deals. Despite this, Crypto’s bull market continued until April, and Bitcoin set a record of more than $60,000 per unit price; while dogecoin, boosted by Elon Musk, rose at a rocket-like speed. During the same period, Zhu was also bullish on Dogecoin. Nansen reported that 3AC had around $10 billion in assets at the time (although Nansen’s CEO has now clarified that much of that amount was likely borrowed).

Looking back, Sanjian Company seems to have suffered a fatal loss at the time, losing Two important people. In August, two of the fund's minority partners retired simultaneously, working 80 to 100-hour weeks in Hong Kong and managing most of 3AC's business. That leaves much of the work to Davies, Three Arrows' chief risk officer, who appears to be taking a sit-and-go approach to the company's woes. "I think they used to manage risk much better," said their former friend.

Around that time, there were signs that Three Arrows was running into a cash crunch. When lenders ask for collateral for the fund’s margin trades, it often uses its stake in Deribit as collateral, not an asset that’s as easy to sell as Bitcoin. Such illiquid assets are not ideal collateral, and Three Arrows owns Deribit shares along with other investors who have refused to use their shares as collateral. Apparently, 3AC is attempting to mortgage assets it does not have access to, and has done so repeatedly, offering the same stake to various institutions, especially after Bitcoin prices start to drop in late 2021. FTX CEO Sam Bankman-Fried once said: "We have reason to suspect that Three Arrows is trying to mortgage some collateral to many people at the same time."

Soon, the Crypto winter came, and Sanjian knew that he could not survive this winter. With GBTC’s funding hole getting bigger and bigger, and with most of Three Arrows’ capital tied up in restricted stock in smaller Crypto projects, other arbitrage opportunities have dried up. Therefore, Sanjian decided to increase the risk of its investment, hoping to obtain huge profits and let the company regain its foothold.

In February, Three Arrows made a major move: It will Throw in a hot token called luna, created by Stanford University dropout Do Kwon, whom Davies and Zhu met in Singapore.

About the same time, Zhu and Davies planned to leave Singapore and transfer part of the company's legal basis to Facilities moved to the British Virgin Islands. In April, Three Arrows announced it would move its headquarters to Dubai. That month, Zhu and Davies bought two villas for a total of about $30 million, including one next to the Crystal Lagoon in Dubai's District 1, a man-made ocean-blue oasis larger than any other in the world. Both are big. Showing the side-by-side photographs of mansions, Zhu told his friends he bought one from the Azerbaijani consul — a 17,000-square-foot compound that resembles a fortress.

Then in early May, Luna suddenly crashed, wiping over 40 billion market value in dollars. Its value is pegged to a stablecoin called terraUSD, so when terraUSD failed to maintain its peg to the U.S. dollar, both currencies collapsed. According to Herbert Sim, a Singapore-based investor who tracks 3AC’s wallets, Three Arrows’ holdings of Luna were at one point as high as $500 million, but suddenly they were down to $604. As the situation escalated, Scott Odell, Head of Lending at Blockchain.com, contacted the company to ask about the amount of luna it held — after all, the loan agreement stipulates that if Three Arrows experiences a drawdown of at least 4%, it must notify the company. company. "Anyway, as part of a portfolio, it's not that big of a deal," 3AC's top trader Edward Zhao wrote back. Hours later, Odell notified Zhao that it needed to recover its $270 million loan and would accept payments in U.S. dollars or stablecoins. Zhao was clearly caught off guard by this.

The next day, Odell contacted Davies directly to assure him that everything was working. He sent Blockchain.com a plain and unwatermarked letter, claiming that the firm manages $2.387 billion in assets. Meanwhile, Three Arrows is making similar explanations to at least six lenders. Blockchain.com, however, is skeptical of this NAV pledge.

A few days later, instead of backing down, Davies threatened that if Blockchain.com withdraws 3AC’s loan, he will "boycott" the company. “That’s the moment we knew something wasn’t right,” said Lane Kasselman, Blockchain.com’s chief business officer. Zhu and Davies, who used to hold regular pitches on Zoom, didn’t work that month, according to a former employee. suddenly disappeared.

In late May, Zhu sent a tweet, which can also be said to be his epitaph Ming: "Unfortunately, the price theory of the super cycle may not be accurate." However, he and Davies still pretended to be calm. The two called every Crypto investor they knew, asked to borrow a large amount of Bitcoin, and provided The company's consistently high interest rates. But “they were clearly touting their capabilities as a crypto hedge fund after they already knew they were in trouble,” said one of the lenders. Under pressure, Three Arrows began scrounging for funds in order to repay other lenders. In mid-June, a month after luna’s collapse, Davies told Blockchain.com’s chief strategy officer, Charles McGarraugh, that he was trying to secure a loan of 5,000 Bitcoin (worth about $125 million at the time) from Genesis to repay another lender. loans, thereby avoiding the liquidation of their positions.

But in actual operation, Sanjian Company has caused a large-scale financial disorder, making People were selling to stay solvent, wrecking the entire market: as 3AC and other investors scrambled to sell, the market price continued to be pushed down, creating a vicious cycle. Lenders demanded more collateral and sold positions when 3AC and others were unable to provide it, sending Bitcoin and other currencies to multi-year lows, and that decline sparked further losses. The plunge quickly hit the headlines as the overall value of the crypto market fell from a peak of $3 trillion in late 2021 to below $1 trillion. McGarraugh said Davies told him that “if the crypto market continues to fall, there will be problems with 3AC.” That was the last time someone from Blockchain.com spoke to Davies, and he and Zhu stopped answering any questions after that.

Rumors that the company is headed for bankruptcy sparked heated discussions on Twitter, further fueling the Larger Crypto sell-off. On June 14, Zhu finally tweeted: “We are in communication with all parties involved and working hard to resolve this issue.” A few days later, Davies was interviewed by The Wall Street Journal, in which he noted that , he and Zhu are still "Crypto believers," but he admits that "the collapse of terra-luna really caught us off guard."

Zhu started selling his mansion, and at the same time, the company started moving money around. On June 14, the same day Zhu tweeted, 3AC sent nearly $32 million in stablecoins to a wallet belonging to an affiliate in the Cayman Islands. In the last days of Three Arrows, its partners borrowed Bitcoin from every Crypto whale they knew, and I believe 3AC must have found a lender of last resort among some dangerous people, so that would explain why Zhu and Davies went into hiding . "They paid the mafia money back. If you start borrowing money from these people, you're really cornered," said the former trader and 3AC business partner.

After Three Arrows went bankrupt, Crypto Exchange was surprised to find that Three Arrows had no short positions, that is to say, it had stopped hedging; Three Arrows has always maintained that this is the cornerstone of its strategy. Investors and exchange executives now speculate that 3AC should have been leveraged at around three times its assets at the last minute, but some suspect it could be much more.

Three Arrows seems to have put all their money in mixed accounts, and these funds Unbeknownst to the owners, they take a portion of each account to repay the lender. “They’ve probably been running these things with Excel sheets,” Walsh said, meaning that when 3AC ignored margin calls and locked out lenders in mid-June, the loans, which include FTX and Genesis, People liquidated their accounts without realizing they were also selling assets belonging to 3AC's partners and clients. (The same thing happened to 8 Blocks Capital, which tweeted in June Complaining that $1 million in its 3AC trading account suddenly disappeared out of thin air)

In the company After traders stopped responding to messages, lenders tried calling, emailing, and messaging them on every platform, and even called their friends to go directly to their homes to collect debts, before even liquidating their collateral. Through the door of 3AC's Singapore office, one can see weeks of mail stacked on the floor. Those who viewed Zhu and Davies as friends and lent them the money weeks ago without knowing the specifics now see nothing but anger and betrayal. Genesis Global Trading, which lent Three Arrows the most of any lender, filed a $1.2 billion claim against it. Other companies have also lent them billions of dollars, mostly in Bitcoin and Ethereum. Liquidators have recovered only $40 million in assets so far. " Obviously, they’re bankrupt and they’re continuing to borrow, which really looks like a classic Ponzi scheme,” Kasselman said.

When Three Arrows Capital filed for bankruptcy in the Southern District of New York on July 1, at most It's just a process. But surprisingly, 3AC's founder filed a claim earlier than other creditors: first in line were Zhu himself, who filed a $5 million claim on June 26, and Davies' wife Kelly Kaili Chen, who claims she lent nearly $66 million to the fund. However, the documents they provided did not say when the loans were made or what the funds would be used for. For that, Walsh. "While insiders are unaware of Chen's involvement in the company, they believe she must be acting on behalf of Davies; her name appears on various entities in the company, likely due to tax considerations," said the source. , Zhu's and Davies' mothers have also filed claims.

Informed sources said that since the Liquidators have been unable to contact Zhu and Davies since the company filed for bankruptcy, and their whereabouts were not known until press time. Their lawyers said the co-founders had received death threats. On July 8 During a Zoom conference call at , users named Zhu and Davies turned off their cameras and refused to unmute them even as liquidators posed them dozens of questions.

Three Arrows is also being closely watched by authorities, with the Monetary Authority of Singapore investigating whether 3AC has "further breached" its regulations. Meanwhile, the bureau has already reprimanded it for providing "false or misleading" information. If their company is in the US, all Three Arrows court filings are now copied to SEC enforcement attorneys.

On July 21, Zhu and Davies were interviewed by Bloomberg "at an undisclosed location" interview. The interview was unusual: Zhu was dissatisfied with his lifestyle in the news; at the same time, the two blamed 3AC's bankruptcy on the fact that they did not foresee the downward trend of the Crypto market, and the super cycle was not mentioned throughout. word. Zhu said, "Our market positioning led to the end result," while Davies added, "We made the most in the company's glory days, and we have the most to lose today."

The pair also told Bloomberg that they were planning to travel to Dubai, and their friends said they were already there. In this regard, the lawyer explained that Dubai has no extradition treaty with Singapore or the United States, so it has become their best choice.