3AC founders Su Zhu and Kyle Davis have just been detained at an airport in Dubai, while trying to board a private jet to Switzerland.— CryptoWhale (@CryptoWhale) July 19, 2022
“Anonymous” Affidavit Reveals Debt Confusion
The extensive court document disclosed an affidavit, allegedly by one ‘Robert Gardner’, who turned out to be Kyle Davies himself. Apparently, Su Zhu had staked over $1.4 billion in the offshore fund due to market turmoil brought about by the Terra (LUNA) and Terra (UST) disaster. Allegedly, Do Kwon’s Terra (LUNA) alone is responsible for $600 million of 3AC’s losses.
Davies claimed in the affidavit that Three Arrows Capital owes $65 million to his wife Chen Kaili Kelly, and also “confirmed” Su Zhu’s claim of $5 million. The team behind Three Arrows Capital are looking to claim an additional $25 million via ThreeAC Limited, the investment project manager of the fallen crypto hedge fund.
Su Zhu is claiming $5m, ThreeAC Limited is claiming $25m, and Chen Kaili Kelly (Kyle's wife) is claiming $66m. Interestingly, these claims may be considered as quasi-equity and be subordinated to creditors resulting in them rightfully getting 0— Soldman Gachs ⌐◨-◨ (@DrSoldmanGachs) July 19, 2022
3AC Caused Crypto Contagion, Says Analyst
Crypto analyst, and Founder of Crypto Pragmatist Jack Niewold published a quick analysis of the documents on his Twitter profile. According to him, Three Arrows Capital kept most of their investors in the dark about the “extent of the losses”.
The hedge fund’s biggest creditor was revealed to be Genesis, which is a subsidiary of Digital Currency Group. Three Arrows Capital reportedly owes the firm around $2.3 billion, while the 1,000-page summer read details a total level of debt of $3.5 billion for Three Arrows Capital. Unsurprisingly, the founders were forced to agree to participate in the emergency liquidation meeting by authorities.
That’s when the race started – in a compromise Zoom meeting that was held later, both Three Arrows Capital Co-Founders lurked in the call with both microphones and cameras off.
To get you up to speed:— Jack Niewold (@JackNiewold) July 18, 2022
After making a series of large directional trades (GBTC, LUNA, stETH) and borrowing from 20+ large institutions, Three Arrows Capital (3ac) went bust.
Then the founders ran, and the loan defaults have lead to mass contagion in crypto.
On the Flipside
- Celsius managed to pay back significant chunks of its debt to MakerDAO & others, despite ‘Chapter 11’ bankruptcy.