3AC founder weighs in on crypto climate, hints at setting up new fund

Su Zhu, the man behind Three Arrows Capital, had been silent on social media following the collapse of his crypto hedge fund earlier this year. That was until the crypto industry was jolted by an even bigger and more catastrophic event, the downfall of Bahamas-based FTX. 

The 35-year-old, who once headed the world’s largest crypto hedge fund and managed billions of dollars, has now been reduced to a fugitive who has been avoiding law enforcement agencies. However, the collapse of FTX seems to have given him the perfect opportunity to try and defend his actions and share his thoughts on the current climate in the crypto industry.

Blame game goes on 

Zhu took to Twitter recently to give his opinions on how the crypto industry can recover from the damage dealt by FTX’s collapse. Ironically, the collapse itself was a domino effect of his own hedge fund’s questionable business practices. 

In a first, he acknowledged the role that Three Arrows Capital played in the crypto contagion earlier this year. However, Zhu took this opportunity to try and defend his actions, outlining how the decisions made by entities other than 3AC affected their business activities. 

“In early spring we returned billions of loans in one go, which then led lenders to panic (as they borrow fixed from clients) and beg us to take them again (we) were lulled into a sense of infinite backstop.”

Regulation and self-custody will speed up recovery 

Zhu believes that CeFi yields products, which have been involved in various controversies including the bankruptcies of the Celsius Network and Voyager Digital.

According to him, insider trading is a chronic problem in the industry and needs to be fixed through regulations. Regulations should also address the conflict of interest that arises at crypto firms, especially in the dealing made with associated entities.

Zhu has also recommended increased transparency in centralized exchanges and greater adoption of DeFi paired with self-custody in order to expedite the recovery of the crypto industry. 

He further added that the new generation of investors and builders needs to focus less on ponzinomics and focus more on decentralization to create permanently valuable communities. 

Zhu hints at the launch of a hybrid fund

In an interview with Bloomberg yesterday (22 November), Su Zhu indicated that in the months following 3AC’s collapse he has been doing a lot of thinking, including the possibility of launching an “all-weather” fund. This new fund would invest in both crypto as well as traditional assets. 

Zhu added that there is no rush to launch this new fund. He has indicated it’s just the beginning and that the contagion has yet more victims to claim.