The disgraced creators of Three Arrows Capital opened up about the terrible demise of their once-flying hedge fund after spending five weeks in hiding. They said that the reason they went undiscovered was that they had received threats to their life.
According to Bloomberg, Su Zhu and Kyle Davies, both 35 years old, asserted on Friday that Three Arrows’ leverage demands on loans that should never have been taken due to their unsuccessful cryptocurrency enterprise are declining.
According to Zhu and Davies, three Arrows’ sudden downfall is blamed on overly optimistic assumptions. Zhu says they put themselves up for a market “that never developed.”
The liquidators’ counsel stated in documents provided on July 8 that Zhu and Davies had not been in touch with them and that the location of the company’s founders was unknown. According to Zhu, they were forced to go into hiding because of threats to their lives.
“People may consider us silly or delusional,” Zhu told Bloomberg. “And I’ll take it. Maybe. But when I added more about my cashback over the past time, they claimed I stole the money. That can’t be right.”
Zhu and Davies showed a pattern of ineffective risk management, where credit availability increased the impact of failed bets.
“What We Didn’t Anticipate Was That Luna Might Fall to Zero”
The pair admitted that the collapse had significantly hurt people, but they largely shied away from inquiries about how it affected other cryptocurrency ecosystem participants. Instead of denying claims that they took assets out of Three Arrows before its bankruptcy, they emphasized their huge losses.
The letter states that Zhu and Davies blamed overexposure to Terra, staked Ethereum, and Grayscale’s Bitcoin trust for the hedge fund’s downfall. Zhu said that he had not seen any warning signs in Terra’s situation at first.
“What we didn’t anticipate was that luna might fall to zero in a matter of days, trigging a credit squeeze across the industry and pushing great pressure on all of our illiquid assets,” the statement continued.
After the company “doing business as usual,” zhu stated that “bitcoin climbed from $0 to $20,000, which was incredibly challenging for us.”
The two founders have resisted disclosing their present whereabouts in the meantime. However, one of the lawyers in the conversation anticipated that they would ultimately end up in the United Arab Emirates, which has recently developed into a center for cryptocurrency.
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