Unexpected shutdown within weeks of a trigger · Fatal mistake: Leveraged 100x on illiquid LUNA positions while misrepresenting fund health to lenders including Genesis, Celsius, and BlockFi
External investor AUM — not traditional VC funding
Founder
Su Zhu, Kyle Davies
// the model, blind
Evaluating only Three Arrows Capital’s profile at its peak — without knowing the outcome — the model ranked Fraud as the #1 likely cause. That’s exactly how it died.
Key Events Timeline
FUNDING
3AC reports ~$18B AUM; Su Zhu and Kyle Davies appear on major crypto podcasts as industry elder statesmen; fund considered most credible institutional name in crypto.
SHUTDOWN
UST stablecoin depeg triggers LUNA spiral to near zero; 3AC loses estimated $600M on LUNA positions; fund cannot meet margin calls from Genesis, Celsius, Voyager, BlockFi totalling >$3.5B.
LAYOFF
BVI court orders Three Arrows Capital wound up; Teneo appointed as liquidator; Su Zhu and Kyle Davies go silent on social media and cease responding to creditors.
FRAUD EXPOSURE
Su Zhu arrested at Singapore Changi Airport attempting to board a flight; sentenced to four months imprisonment. Kyle Davies remains at large. Liquidators claim $3.5B+ from founders.
Full Analysis
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Documented cause
Three Arrows Capital was founded in 2012 by Su Zhu and Kyle Davies, two former Credit Suisse fixed income traders, as a Singapore-based crypto hedge fund. By 2021, their track record — driven by early concentrated bets on Ethereum, Avalanche, and Solana — had generated extraordinary returns and attracted billions in external capital from institutions and exchanges worldwide. At peak in late 2021, 3AC managed approximately $18 billion in assets under management and was considered the most credible institutional name in crypto. The collapse was triggered by its massive undisclosed exposure to the Terra/LUNA ecosystem. When Terraform Labs' algorithmic stablecoin UST broke its peg on May 9, 2022, and the associated LUNA token collapsed from $80 to near zero in 72 hours, 3AC's estimated $600 million position was wiped out. The fund had borrowed heavily from Genesis Capital, Celsius Network, BlockFi, and Voyager Digital — all of which issued margin calls that 3AC could not meet. By June 2022, the British Virgin Islands court had ordered 3AC's liquidation. Su Zhu and Kyle Davies went dark on social media and disappeared. Liquidators from Teneo recovered virtually no assets. Su Zhu was arrested in Singapore in September 2023 attempting to board a flight; Kyle Davies remained at large. The 3AC collapse directly triggered the bankruptcy of Celsius, Voyager, and Genesis, making it the single most consequential domino of the 2022 crypto winter.
Lesson
“The leverage amplifies in both directions — a fund that returned 2,000% in the bull market was betting 100x on assets that could go to zero. When your counterparties include the exchanges and lenders you are borrowing from, the whole ecosystem collapses in a single chain reaction. There is no Pivot card when the fund owes more than it holds.”
Failure anatomy
Collapse type
Sudden Collapse
⚡ HIGH
Hype cycle
crypto leverage mania 2021
Moat type
Fund Track Record
Fatal mistake
Leveraged 100x on illiquid LUNA positions while misrepresenting fund health to lenders including Genesis, Celsius, and BlockFi