An interview with 3AC founders Su Zhu and Kyle Davies, who may be hiding in the UAE, on its “regrettable” collapse, leverage, Luna, risk management, and more
After five weeks in hiding, the disgraced founders of Three Arrows Capital spoke extensively about the spectacular implosion …
Context & Ripple Effects
Three Arrows Capital's collapse had already moved into a formal recovery phase: liquidators said they could not locate Zhu and Davies and sought subpoenas to protect the fund's assets. Their interview therefore sits alongside the liquidators’ effort to locate the founders, rather than resolving it.
Related coverage characterizes the fund's strategy as a bet that crypto prices would keep rising. The founders' discussion of leverage, Luna, and risk management supplies their public account of the decisions behind that breakdown.
First-order effects
- Zhu and Davies become publicly reachable to discuss the failure while Three Arrows Capital's liquidators are still pursuing formal means to obtain documents and safeguard assets.
- The interview places the founders' explanations of leverage, Luna, and risk management against the fund's collapse, creating a public record distinct from the liquidation process.
Second-order effects
- Liquidators' pursuit of subpoenas remains central because public interviews do not substitute for the documents and cooperation sought in the asset-recovery process.
- The contrast between the founders' account and coverage of the fund's one-way price bet makes risk controls and leverage central points of scrutiny in the Three Arrows unwind.
Third-order effects
- If high-profile fund failures repeatedly pair public explanations with limited cooperation in liquidation, recovery processes will become a more important test of accountability than founders' post-collapse narratives.
- Crypto investment firms built around concentrated directional bets face a structural governance challenge: losses can spread faster than the mechanisms used to document decisions and recover assets.
The trend: Three Arrows Capital is part of a broader shift in which crypto fund blowups expose the gap between aggressive, concentrated trading strategies and the accountability required during liquidation.