Three Arrows Capital

» see threearrowscap.com as it lived, on the wayback machine

~ the obit ~

three arrows capital sat on the part of crypto i could read about but did not touch. a singapore hedge fund running ten billion dollars is a different layer than what most retail saw, the kind of position you only knew existed when something inside it broke. by june 2022 something had broken and most of the press caught up at the same time the bvi court did.

su zhu and kyle davies met at phillips academy and went to columbia together. they did a stint at credit suisse trading derivatives and then started 3ac in 2012 to arbitrage emerging-market fx options. when banks pulled their fx lines around 2017 they pivoted to crypto, where the spread on the gbtc grayscale trust was wider than anything banks would let them touch.

i was not anywhere near this part of the market. crypto in turkey ran on btcturk and paribu, then through binance global when btcturk got slow. by 2022 turkish lira inflation had pushed a chunk of retail into stablecoins as a savings store, which made the contagion in may and june immediate in turkish prices. three arrows was upstream of all of that, the size of fund that retail never met but whose collapse moved their portfolio.

~ the rap sheet ~

~ the cracks ~

the gbtc trade had carried 3ac for years. grayscale's bitcoin trust traded at a premium to spot for most of 2020 and 2021. the fund could borrow stablecoins to mint shares at par, then unlock the shares six months later into a market premium. the premium turned into a discount in early 2021 and the trade ran the other way. by march 2022 the gbtc position was reportedly nine figures of unrealized loss.

the luna position was the second thing. su zhu put roughly $200 million into luna in february 2022, partly on the back of his own twitter thesis about the "supercycle." the terra ecosystem was paying 20% yield on the ust stablecoin via the anchor protocol, and the model held together as long as luna kept its valuation. when ust depegged on may 9 2022, luna lost 99% in three days. the 3ac position went with it.

~ what survived ~

june 27 2022 was the date that landed in the headlines. a bvi court accepted teneo as joint liquidators, the same morning voyager digital filed a public default notice over an unpaid $665 million loan from 3ac. within days celsius froze withdrawals. voyager itself filed for bankruptcy on july 6, and ftx was gone by november. the chain reaction was already running on june 27, it just got named that day.

su zhu was arrested in singapore in september 2023 for not cooperating with the liquidators. kyle davies kept tweeting through it. both of them launched new crypto ventures in 2023 and 2024, which the existing 3ac creditors with $3.5 billion in claims found less than reassuring. by 2026 the liquidation was still grinding through the bvi system.

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