Embattled Three Arrows Capital Resurface after Five Weeks, Break Silence on ‘Wrong’ Allegations Directed at Them

Three Arrows Capital cofounders finally granted an interview to refute allegations that they moved funds before the company collapsed.

The embattled cofounders of Three Arrows Capital (3AC) recently resurfaced after five weeks in hiding to debunk pervasive allegations directed at them. The founders, Kyle Davies and Su Zhu, have said they did not move funds out of Three Arrows before its collapse. The duo also expressed regret that the Singapore-based crypto hedge fund crashed but maintained their innocence. Furthermore, Davies and Zhu declined to give away their current location, which remains shrouded in mystery.

However, one of the lawyers on the call suggested that the duo was likely heading to the United Arab Emirates. Zhu seemed to corroborate this suggestion with a previous separate assertion which stated:

“Given that we had planned to move the business to Dubai, we have to go there soon to assess whether we move there as originally planned or if the future holds something different for us.”

Three Arrows Capital Co-founders Suggest Allegations of Financial Impropriety Are Misplaced

In an interview with Bloomberg, Davies and Zhu broke their silence, speaking on the dramatic collapse of their once thriving hedge fund. Touching on the massive $2.8 billion pile of debt currently owed to creditors, the duo blamed bad business decisions. According to the Three Arrows Capital cofounders, their bungled and ill-fated crypto speculation should never have been made. This is because it triggered a torrent of margin calls on loans that were unnecessary at the time.

Comparing 3AC’s collapse to embattled crypto lending firm Celsius, Zhu implied that his company failed to retain enough liquidity to honor customer redemptions. Instead, Three Arrows Capital placed leveraged trades in the hopes that the crypto market would eventually rebound on the upside.

One of Three Arrows Capital’s largest investment positions that went up in flames was the ill-fated Terra ecosystem and its LUNA token. Terra saw its market value, alongside the old LUNA and now defunct UST stablecoin, plunge to zero back in May.

The duo shed more light on a systemic failure of risk management where easily-accessible credit exacerbated the brunt of wrong-way bets. In addition, the runaway cofounders also acknowledged the triggered widespread pain throughout the industry caused by the defunct company’s actions.

Furthermore, the co-founders also emphasized that they incurred heavy losses while shirking all other apparent allegations from the public. In absolute denial of diverting some funds to a safety net just before Three Arrows Capital went bust, Zhu explained:

“People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe. But they’re [going to], you know, say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true.”

Disgraced Cofounders Maintain Obscurity for ‘Their Own Safety’

Zhu also maintains that he and Kyle are cooperating with authorities. However, he said they both have to keep a low profile for their safety. As he put it, “for Kyle and I, there are so many crazy people in crypto that kind of made death threats or all this kind of noise. We feel that it’s just the interest for everyone if we can be physically secured and keep a low profile.”