Two of the founders of Three Arrows Capital (3AC), who have spent the last five weeks in hiding, have spoken out about the collapse of their crypto fund. Su Zhu and Kyle Davies claim that their erroneous positive speculation about the crypto market triggered the margin call on loans that should never have been issued, according to a Bloomberg report published Friday, July 22. The two young men from 3AC had turned 3AC into a trading giant before its collapse, bankrupting creditors and accelerating a liquidation that forced investors of Bitcoin and other tokens to take significant losses. Theyadmitted that the collapse caused considerable suffering and they emphasized the significant losses they had incurred while disputing charges that they had taken money from 3AC before things went wrong. Zhu stated:
“What we failed to realize was that Luna would be able to drop to zero in a matter of days, and that this would catalyze an industry-wide credit crunch that would put significant pressure on all of our positions. […] People might call us stupid or delusional, and I accept that. But they will also say that I have withdrawn funds during the last period, when I actually invested more of my personal money.”
However, on 30 June, a press release from MAS, Monetary Authority of Singapore, accused Three Arrows Capital of deliberately providing false information to the government. According to the statement, the fund transferred management to an unrelated offshore entity on September 1, 2021. However, the entity was also partially owned by Su Zhu, a fact that the fund did not disclose to authorities in Singapore, where it was headquartered. the 3AC. After issuing a liquidation order for the fund on June 27, in documents filed on July 8, the consultants in charge said that Zhu and Davies had not cooperated with them, and that the location of the company’s founders was unknown. Zhu said they were forced into hiding because they had received death threats. Zhu added during a conversation with Davies and two Solitaire LLP lawyers: “This does not mean that we have not communicated with all relevant authorities. We’ve been communicating with them since day one.”
“The whole situation is unfortunate, many people lost a lot of money. However, we believe in everything to the fullest. We had almost all of our assets invested in there. […] And then, when it all started to go wrong, we were the ones who lost the most.” added Davies.
The two individuals declined to reveal their current location. Even so, one of the lawyers who participated in the conversation speculated that his destination was the United Arab Emirates, which have recently emerged as a hub of cryptocurrency activity. This week, creditors wondered why the 3AC founders put an advance on a yacht worth $50 million dollars before the fund crashed. Zhu said these complaints are part of a “conspiracy to tarnish the company’s reputation.” According to Zhu, the boat “was purchased over a year ago and commissioned to be built and used in Europe.” He also claimed that he led a humble lifestyle, noting that he cycled to and from work every day, and that his family “only have two houses in Singapore.” Finally, in response to questions about what went wrong at the company, Zhu noticed the overconfidence that grew out of a bull market year, which infected not just him and Davies, but virtually the entire credit infrastructure of the industry.
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