An in-depth look at the rise and fall of crypto hedge fund Three Arrows Capital, whose founders Su Zhu and Kyle Davies bet everything on prices only going up
Three Arrows Capital's catastrophic losses end the fund's standing as an operating crypto hedge fund, while placing Zhu and Davies' bullish strategy at the center of the failure.
Zhu and Davies face immediate scrutiny over the leverage and risk-management choices tied to 3AC's collapse.
Second-order effects
The reported liquidation reframes counterparties' exposure to 3AC from a solvency question into a loss-recovery problem, raising the importance of the fund's outstanding obligations.
Crypto investment firms using similarly directional, leveraged strategies face sharper demands to explain how their risk controls differ from those discussed in the 3AC collapse.
Third-order effects
If prominent crypto funds continue to fail after concentrated price bets, institutional credibility in the sector will increasingly depend on demonstrable risk management rather than founders' market reputations.
The trend: Three Arrows Capital is a data point in crypto's legitimacy gap, where high-profile fund failures make leverage discipline and accountability central to market trust.
Sadly, our good faith to cooperate with the Liquidators was met with baiting. Hope that they did exercise good faith wrt the StarkWare token warrants. https://twitter.com/...
Really good article. Reminds me of the Chuck Prince quote: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance.” https://twitter.com/...
Think this @hosseeb quote really captures what most struck me writing about 3AC They really practiced what they preached! They really bought the dip, even on margin! In May, when Luna was collapsing, Kyle was still talking about buying BTC and ETH *on margin* https://twitter.com/…
Three Arrows was a venture investor in some of the best-known crypto startups and, in some cases, manager of their corporate treasuries. It was both an aggressive borrower from large lenders and a shareholder in some of those lenders https://www.bloomberg.com/...
Three Arrows became the most important hedge fund in crypto. But when the price of Bitcoin fell, the fund's sudden collapse revealed how interconnected the crypto industry is https://www.bloomberg.com/...
I learned recently that the phrase “hedge fund” applies to a specific shape of legal entity and does not require that the entity have any actual hedging strategy, which is how you get a company that works only if crypto keeps going up forever. https://www.bloomberg.com/...
Some Crypto trading platforms have since disclosed exposures to 3AC. One has gone under after 3AC defaulted on a loan worth more than $650 million. Its customers have had their crypto accounts frozen and are unlikely to get all their assets back https://www.bloomberg.com/...
GREAT READ: Three Arrows bet everything on Bitcoin's rise. When prices fell, the hedge fund's sudden collapse rocked the industry https://www.bloomberg.com/... via @BW
Tale as old as time: “What surprises me most about 3AC's collapse was how they were able to amass so much leverage in the first place” https://www.bloomberg.com/... via @BW
“They might have been stupid and misguided .. But they really believe this stuff, and you can see it in their books, right? You wouldn't have traded this way, if you didn't believe that this was true.” #crypto @business https://www.bloomberg.com/...
Wrote about the rise and fall of Three Arrows Capital with @MuyaoShen and @BenBartenstein Between their big bank trading experience and crypto connections, everyone assumed they were pros. “They turned out to be degens like everyone else.” https://www.bloomberg.com/... @crypto @B…
FINALLY!! If you wonder how exactly 3AC turned to crypto's Archegos or Long-Term Capital Management, we investigated and reported from Singapore, Dubai, to London, and New York. w @justinaknope @BenBartenstein via @crypto @BW https://www.bloomberg.com/...
How Crypto Hedge Fund Three Arrows Capital Fell Apart (3AC) - Bloomberg “Su Zhu and Kyle Davies turned 3AC into the most important hedge fund in crypto, but they bet everything on prices only going up.” That is not a hedge fun, it was a gambling operation https://www.bloomberg.co…
Why I think @zhusu is full of it (1/x): + The Liquidator, Teneo, was appointed late June; Warrant exercise by July 5 + Teneo needs to go through 100s of contracts + positions w/ context of 3ACs biz + They likely triaged liquid assets first as Su/Kyle could run off with those http…
Liquidators for crypto hedge fund Three Arrows Capital obtained U.S. court permission on Tuesday to issue subpoenas and lay claim to the bankrupt Singapore-based company's assets, noting that 3AC's missing-in-action founders no longer control its accounts https://www.reuters.com/…
Very odd Liquidators not exercising StarkWare warrants This might be explained by average Liquidator being old and surely not familiar with crypto, therefore not willing to pay [even a super low] strike price to convert to StarkWare tokens This is harmful to creditors tho.. https…
Investors money in Canada's Voyageur Digital landed at this vacant office. Or did it? Reminds me of that Vancouver - China digital currency exchange and crypto lender run out of a vacant WeWork office in Vancouver. 🐋 https://www.bloomberg.com/...
Guessing the liquidity is now in the form of a ghost yacht.... Three Arrows Founders' Whereabouts Are Unknown, Foiling Liquidators https://www.bloomberg.com/...
If I were in deep financial doo doo and owed money to half of crypto because I ran my hedge fund into the ground, I wouldn't post lawyers' communications on Twitter. Also, where are Kyle and Zhu? No one seems to know. https://twitter.com/...
👀 The founders of bankrupt crypto hedge fund Three Arrows Capital haven't been cooperating in the firm's liquidation process and their whereabouts were unknown as of Friday, according to court papers. - I'm sure it's nothing 😬 https://www.bloomberg.com/...