Man with shadows

3AC’s tangled web leaves creditors out missing billions

The bankruptcy of ‘crypto’ hedge fund Three Arrows Capital (3AC) continues to rock the wider digital asset sector, threatening an ever-widening pool of companies that put their trust in a pair of scammers.

3AC’s collapse began when Terraform Labs’ algorithmic stablecoin terraUSD (UST) lost its peg to the U.S. dollar this spring. With exposure to UST of up to $600 million, 3AC began defaulting on billions of dollars in loans it received from dozens of major players within the digital asset space, leading to a wave of insolvencies that has yet to subside.

Court filings now offer a glimpse into the scale of the carnage, with 27 companies owed a combined $3.5 billion they are unlikely to collect. The single largest creditor is Genesis Global Trading, a subsidiary of Digital Currency Group (DCG), the Mastercard-linked Forrest Gump of the digital currency investment space that invests in seemingly every dodgy project around.

Genesis lent $2.36 billion to 3AC, a serious hole in one’s balance sheet that would push most firms to the financial brink. Genesis was able to liquidate some of the collateral that 3AC put up for the loans, but that still left Genesis with a $1.2 billion claim against 3AC. DCG has stated that it has assumed responsibility for this claim and “Genesis continues to be well-capitalized and its operations are business as usual.”

In case anyone doubted the obvious Ponzi scheme that 3AC had become by the time of its collapse, filings reveal that’s Chief Strategy Officer Charles McGarraugh spoke to 3AC co-founder Kyle Davies in mid-June, during which Davies said that 3AC had unsuccessfully tried to borrow an additional 5,000 BTC from Genesis to meet a margin call with another company. (McGarraugh added that future attempts to contact Davies were unsuccessful.)

The second-largest 3AC creditor is Voyager Digital, which unlike Genesis was forced to file for bankruptcy this month. Voyager lent 3AC some $685 million (in BTC and ETH), far more than the roughly $40 million (in USDC) that the similarly bankrupt Celsius Network saw fit to lend 3AC. is reportedly on the hook for over $300 million while the parent company of cryptocurrency exchange Deribit is seeking $80 million from 3AC.

Monday also brought word from Teneo (BVI) Limited, the company appointed to oversee 3AC’s liquidation, that a five-member creditor committee had been formed. This ‘biggest loser’ committee—consisting of DCG, Voyager,, the CoinList exchange and Singapore-based platform Matrixport—will “work closely with [Teneo] to support the interests of all creditors through each stage of the insolvency.”

Keep it in the family

Among 3AC’s more controversial creditors is the company’s other co-founder Su Zhu, who claims to have lent his firm over $5 million. Then there’s Kyle Davies’ wife Chen Kaili Kelly, who claims to be owed $65.7 million, which raises serious questions about how 3AC conducted business.

Deribit’s court filing cites a series of transfers of USDT/USDC worth nearly $32 million that 3AC made on June 14. The wallet to which these stablecoins were sent belongs to Tai Ping Shan Limited, a Cayman Islands company indirectly owned by Zhu and Chen. This company is partial owner of TPS Capital, which had a LinkedIn account that once described itself as “the official OTC desk of Three Arrows Capital.”

This since-scrubbed reference appears to have been a slip-up in the complex ownership structure that tried to mask the incestuous nature of companies under the control of Zhu and Davies and their paramours. TPS Capital defaulted on its own loans following the onset of ‘crypto winter’ and the millions in stablecoins transferred from 3AC to Tai Ping Shan may have been intended to help honor these debts. Or not. As Teneo puts it, “it was unclear where those funds subsequently went.”

That wasn’t the only sketchy activity 3AC engaged in, as Teneo cites the movement of tens of millions of dollars’ worth of various tokens in and out of various wallets and on and off exchanges during 3AC’s collapse. Teneo allows that some of these transactions “might have been the result of margin calls on loans taken out” by 3AC. However, “the lack of specificity on these transactions meant … creditors had no real visibility” as to the purpose of these transactions. Teneo left open the possibility that 3AC was “continuing to trade, potentially to the detriment of its creditors.” 

Neither Zhu nor Davies has made their whereabouts known since 3AC’s implosion—Teneo’s filing cites the “virtual radio silence” from 3AC’s management/directors since the process began—but the liquidation report did reveal some details on the lavish lifestyles the pair may have enjoyed with the funds their creditors are now trying to reclaim.

Zhu and Davies reportedly made a down payment on a $50 million yacht as their company was collapsing around them. Creditors are also trying to determine the source of the funding for the two Singapore mansions worth a combined $54 million that Zhu and his wife acquired pre-crash.

The suspicion that Zhu and Davies used lenders’ funds to buy luxury items even as their house of cards collapsed around them appears to support a belief espoused by’s McGarraugh, whose filing states that “3AC’s willingness to continue to borrow while it is heavily insolvent whilst making apparent misrepresentations and threats suggests its management cannot be trusted to retain any remaining assets for the benefit of creditors.”


Adding insult to injury, 3AC’s official Twitter account appears to have either been externally hacked or taken over by vengeful 3AC staff. The account has posted some digs at the company’s expense over the past few days, including one tweet seeking to hire a “Plastic Surgeon with 10+ years experience with both Asian and Caucasian patients. Payment in stablecoins, SAFTS and/or promises.”

This appears to be a reference to Bitfinex/Tether co-founder/CFO Giancarlo Devasini, who previously served as a plastic surgeon before deciding that fake money was more lucrative than fake breasts. Always a sign of market confidence when you’re compared with the single largest crypto Ponzi scheme in existence.

The compromised account also tweeted a purported ‘update’ from Davies, the body of which consists entirely of the words “Yo uhh hmm.” Couldn’t have said it better.

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