Three Arrows Capital: The $3.5B Fund That Gambled and Lost

In the middle of June 2022 the lenders who had queued up to hand Three Arrows Capital money started asking for it back, and nobody at the fund answered the phone. On 16 June the Financial Times reported that the Singapore hedge fund had failed to meet margin calls, the demands a lender makes for more collateral when the value of a pledged position falls. Eleven days later a court in the British Virgin Islands ordered it into liquidation. Court papers filed by the liquidators showed it owed about $3.5 billion to 27 creditors.

The fund's founders, Su Zhu and Kyle Davies, had met at Phillips Academy in Massachusetts and started Three Arrows, known as 3AC, in 2012 as a currency trading shop. By 2021 it was one of the best-known names in crypto. Blockchain analytics firm Nansen estimated in March 2022 that it held around $10 billion in crypto assets. Zhu, the louder of the two, spent that year promoting what he called the "supercycle", the idea that crypto prices would keep rising without the usual long crash. On a 2021 podcast he floated a bitcoin price of $2.5 million.

The money was borrowed

Most of what 3AC traded with belonged to other people. Crypto lenders such as Genesis Global Trading, BlockFi, Voyager Digital, Celsius Network and dozens of smaller desks lent it billions, often with little or no collateral, because its reputation was treated as security. In stock market terms it was a hedge fund running on a huge, cheap credit line from brokers who never asked to see the books.

Genesis, a unit of Barry Silbert's Digital Currency Group, alone lent about $2.36 billion, according to claims filed in the liquidation. Voyager, a US crypto broker with listed shares in Toronto, had lent 15,250 bitcoin and 350 million USDC, a stablecoin, which is a token designed to hold a steady value of one US dollar. Voyager put the total at more than $650 million when it sent a notice of default on 27 June 2022.

3AC used that money for large one-way bets. One was on the Grayscale Bitcoin Trust, known as GBTC, a fund that holds bitcoin and trades like a closed-end fund. A January 2021 filing showed 3AC owned roughly 39 million GBTC shares. The trade worked while the shares sold above the value of the bitcoin inside them. In 2021 that premium turned into a discount, and by June 2022 the shares traded about 34% below the value of their bitcoin.

LUNA, then the margin calls

The second blow came from Terra. In February 2022 3AC put about $200 million into LUNA, the token behind TerraUSD, an algorithmic stablecoin that relied on a trading mechanism rather than cash reserves to hold its dollar value. In May 2022 TerraUSD lost its peg and LUNA fell to almost nothing within a week. 3AC's stake went with it.

Zhu tweeted on 27 May that his "supercycle price thesis was regrettably wrong", The Block reported. Two weeks later bitcoin fell below $20,000. Every lender that had marked 3AC as safe now wanted collateral or repayment at the same moment, and the fund had neither. Zhu and Davies stopped responding. A July 2022 New York Times report placed them in Bali in June.

The collapse spread through the lenders like a run on a bank. Voyager filed for bankruptcy on 5 July 2022 and froze customer accounts. Genesis was rescued for a time when Digital Currency Group took over about $1.1 billion of the 3AC loss, but it froze withdrawals that November and filed for bankruptcy in January 2023. BlockFi, already weakened, went under in November 2022 when its rescuer, FTX, failed. Sam Bankman-Fried, FTX's founder, later blamed 3AC for setting off the chain of failures across crypto lending.

The liquidators and the founders

The court appointed Russell Crumpler and Christopher Farmer of the advisory firm Teneo as joint liquidators. At the start of July 2022 3AC filed for Chapter 15 protection in New York, which shields a foreign company's US assets while an overseas insolvency runs. The liquidators said the founders did not cooperate and that for months they could not find them.

In June 2023 Teneo said it would seek about $1.3 billion from Zhu and Davies personally, accusing them of keeping the fund trading while it was insolvent and of spending fund money on items that included a deposit on a yacht and a Singapore bungalow. In September 2023 the Monetary Authority of Singapore banned both men from regulated financial activity for nine years. That same month a Singapore court sentenced each to four months in prison for contempt after they failed to comply with orders to hand over information. Zhu was arrested at Changi Airport on 29 September 2023 as he tried to leave the country. Davies was outside Singapore and has never been jailed.

Zhu was freed in December 2023 and told interviewers the prison stay had been "really enjoyable". In December 2023 a British Virgin Islands court froze up to $1.14 billion of assets belonging to Zhu, Davies and Davies's wife, Kelly Chen.

While the fund was still being wound up, the two founders launched OPNX, a Hong Kong-linked exchange for trading claims against bankrupt crypto firms, with Mark Lamb and Sudhu Arumugam of the failed lender CoinFLEX. Dubai's Virtual Assets Regulatory Authority fined OPNX about $2.7 million over its marketing in 2023. OPNX told users to withdraw their funds by 14 February 2024 and closed after less than a year.

Where the money stands in 2026

In December 2023 the liquidators valued 3AC's assets at about $1.16 billion against roughly $2.7 billion of recognised claims and estimated that creditors would get back about 46 cents on the dollar, The Block reported. Most of those assets were tokens still locked up under vesting schedules. Settlements with Digital Currency Group, Genesis and BlockFi added about $292 million. On 28 March 2024 the court in the British Virgin Islands approved a first interim payout of up to $100 million.

The biggest remaining claim is against FTX. 3AC's liquidators say FTX seized and sold about $1.53 billion of the fund's assets in 2022 to cover $1.33 billion of its debts. On 13 March 2025 Judge John Dorsey of the US Bankruptcy Court in Delaware allowed them to raise their claim from $120 million to $1.53 billion. FTX's estate objects, arguing the fund's own trading caused the losses. No final ruling had been reported by October 2026.

The founders keep fighting too. In June 2025 Singapore's Court of Appeal upheld orders that Zhu and Davies disclose information to the liquidators, while setting aside a separate order for Zhu's further examination. In August 2026 Singapore's Business Times reported that the liquidators were suing Zhu's wife, Dr Evelyn Tao Yaqiong, for about $40 million. They allege a Dubai villa bought in 2022 with money from a $50 million 3AC loan to Zhu was transferred to her in October 2023, while he was in prison, and sold in January 2024. She denies wrongdoing and says the villa was a gift made in good faith.

Neither founder has faced criminal charges over the collapse. Zhu still posts about markets on X. Four years after the margin calls, the creditors who lent 3AC its billions are still waiting for most of their money.