3AC founders reveal ties to Terra founder, blame overconfidence for collapse

The founders of tainted crypto hedge fund Three Arrow Capital (3AC), which filed for bankruptcy in the first week of July, have finally resurfaced after five weeks of no known whereabouts.

In an interview with Bloomberg, the crypto hedge fund’s two founders Su Zhu and Kyle Davies admitted that the overconfidence born out of a multiyear bull market, where lenders saw their value swell by virtue of financing firms like 3AC, led to a series of bad decisions that should have been avoided.

Zhu also revealed their closeness to Terra founder Do Kwon and claimed they believed the firm was going to do big things. He admitted that the firm’s closeness to Terra made them overlook certain red flags about the firm, which eventually led to their $500 million worth of investment going to zero. Zhu explained:

“If we could have seen that, you know, that this was now like, potentially like attackable in some ways, and that it had grown too, you know, too big, too fast.”

Related: AC liquidators seek time, access to headquarters as Genesis, Algorand ties are untangled

The two founders claimed that the LUNA (now known as Luna Classic) investment surely was a setback for the firm. Still, the real issue began when Bitcoin (BTC) fell below $20,000, and it became impossible for the firm to access additional credit. Zhu claimed that even after LUNA’s collapse, business was as usual, explaining:

“Throughout that period, we continued to do business as usual. But then yeah, after that day, when, you know, Bitcoin went from $30,000 to $20,000, you know, that, that was extremely painful for us. And that was in, that ended up being kind of the nail in the coffin.”

When inquired of their whereabouts and why they have been in hiding, the founders blamed a series of death threats as their reason for going underground. The duo didn’t reveal their current whereabouts, but said they were moving to Dubai.

The founders denied any allegations of pulling out money before 3AC went bankrupt and also cleared the air around the $50 million yacht that was disclosed in the recently filed court case. Zhu said that the boat “was bought over a year ago and commissioned to be built and to be used in Europe,” adding that the yacht “has a full money trail.”