Su Zhu’s cryptic statement as rumors swirl of 3AC liquidations and insolvency

Su Zhu, co-founder of Singapore-based crypto venture capital firm Three Arrows Capital (3AC), has put out a cryptic statement on Twitter in response to swirling rumors that the company is battling against insolvency.

Online chatter about 3AC being unable to meet a margin call began after 3AC started moving assets around this week to top up funds on decentralized finance (DeFi) platforms such as Aave to avoid potential liquidations amid the tanking price of Ether (ETH) this week. There are unconfirmed reports that 3AC faced liquidations totaling hundreds of millions from multiple positions.

DeFi-banking platform Celsius has also been frantically shoring up positions to avoid liquidations. Celsius funds account for a significant proportion of the total value locked in various platforms in the DeFi ecosystem, while 3AC is a major borrower. The collapse of either or both would have significant implications for the entire space.

This wallet (tagged as 3AC on Nansen) has been aggressively paying back AAVE debt against its 223k ETH / $264mm position to avoid liquidation. With $198mm in borrowings against it, @ a 85% liq threshold, a -11% move in ETH to $1,042 liqudates ithttps://t.co/y7yJJ0NlMcpic.twitter.com/2S55Rzl9Xc

— Onchain Wizard (@OnChainWizard) June 15, 2022

In a short and sweet Twitter post from earlier on June 15, Zhu broke his silence after around three days of inaction on social media and suggested that the company is working through its issues:

“We are in the process of communicating with relevant parties and fully committed to working this out.”

Messari Crypto’s Ryan Selkis highlighted speculation that 3AC started to reposition its balance sheet after being on the “wrong side of two synthetic trades — with size — in GBTC and stETH.”

Wu Blockchain also reported that the firm lost around $31.37 million through trading on Bitfinex during May.

According to Bitfinex Leaderboard, Three Arrows lost $31,370,031.97 in Bitfinex trading in May, ranking second. The account lost $37,278,593.9 on Bitfinex this year. In June, the account was not recorded. But losses on a single exchange may just be hedge. https://t.co/Xr8cYjLHII

— Wu Blockchain (@WuBlockchain) June 15, 2022

The rumors ramped up after Zhu removed all mention of investments in ETH, Avalanche (AVAX), Terra (LUNA), Solana (SOL), Near Protocol (NEAR), Mina (MINA), DeFi and nonfungible tokens (NFTs) from his Twitter bio, keeping only a mention of Bitcoin (BTC). Others have raised questions about Su deleting his Instagram and asked why both he and co-founder Kyle Davies were inactive on Twitter for three days.

3AC in trouble? rumors swirling

- Kyle and Zhu havent tweeted or liked anything in days
- Zhu took every coin and # tag out of his bio
- Zhu deleted his instagram
- an hour ago they dumped 30k stETH and reduced all AAVE positions

— moon (@MoonOverlord) June 14, 2022

A related issue is 3AC’s previous exposure to the Terra eco-system via the Luna Classic (LUNC), which experienced a multi-billion market crash in late May. The platform exchanged roughly $500 million worth of Bitcoin  with the Luna Foundation Guard for the equivalent fiat amount in LUNA just weeks before Terra imploded.

Related: Binance.US faces class-action lawsuit over LUNA and UST sale

Other prominent figures in the space such as the former head of crypto Cathie Wood’s Ark Invest, Chris Burniske, also pointed to rumors of 3AC being the next firm to crumble after Terra and Celsius. Alameda Research was also loosely referenced via a meme.

Well 1 of these 3 is down, and 1 I doubt will fall, but the other is something to watch https://t.co/OgBqd7GqHa

— Chris Burniske (@cburniske) June 14, 2022