Su Zhu & Kyle Davies: Three Arrows Capital

On 27 June 2022 a court in the British Virgin Islands ordered Three Arrows Capital, one of the biggest crypto hedge funds in the world, to be wound up. Its two founders, Su Zhu and Kyle Davies, were nowhere to be found. In early July the liquidators told a US court they could not locate them, and creditors were left to read the founders' tweets for clues. Lenders had handed the fund billions of dollars. They would eventually file claims of more than $3 billion against it.

Zhu and Davies had met at Phillips Academy, the American boarding school, studied at Columbia University and traded briefly at Credit Suisse before starting Three Arrows (3AC) in 2012. The fund began in emerging-market currency trading and moved into crypto around 2017. By March 2022 the analytics firm Nansen estimated it held about $10 billion of crypto. Zhu, the chief executive, was its public voice: on Twitter he preached the "supercycle", the idea that Bitcoin's price would no longer crash in four-year cycles but keep rising for years.

Neither man has been charged with a crime. Zhu's prison sentence was for contempt of court, not fraud. What follows comes from court filings, the liquidators' reports and the Monetary Authority of Singapore (MAS), Singapore's financial regulator.

Borrowed money, one-way bets

A hedge fund is a private investment pool for wealthy clients. 3AC's edge was its reputation: crypto lenders such as Genesis, Voyager Digital, BlockFi and Celsius lent it billions, often with little or no collateral, the security a bank would normally demand. It was like a trader being allowed to buy shares on margin with no margin at all.

The fund used the money for large, related bets. One was the Grayscale Bitcoin Trust (GBTC), a US-listed fund that holds bitcoin, a little like a closed-end investment trust. For years GBTC shares traded above the value of the bitcoin inside, and big holders could profit from the gap. 3AC owned almost 39 million GBTC shares at the end of 2020, according to an SEC filing. In early 2021 the premium flipped into a discount, and the trade went into reverse.

Another was Terra. In February 2022 3AC put about $200 million into LUNA, the token behind TerraUSD (UST), a "stablecoin" meant to hold its value at exactly $1 like a digital dollar. In May 2022 UST lost its peg and LUNA fell close to zero within days. Crypto prices across the market fell with them, and the lenders asked for their money back.

The default

A margin call is a lender's demand for more security or repayment when the value of a borrower's holdings falls. The Financial Times reported on 16 June 2022 that 3AC had failed to meet margin calls. On 27 June Voyager Digital, a US crypto broker, issued a notice of default on a loan of 15,250 bitcoin and $350 million in USDC, a dollar stablecoin, worth roughly $665 million at the time. The same day the BVI court put the fund into liquidation and appointed Russell Crumpler and Christopher Farmer of the advisory firm Teneo as liquidators. In early July 2022 3AC filed for Chapter 15 protection in New York, which shields a foreign company's US assets while it is wound up abroad.

The creditors' list showed how far the damage reached. Genesis, the lending arm of Digital Currency Group, was owed about $2.3 billion; its parent took over the claim. Voyager filed for bankruptcy on 5 July 2022, with 3AC's debt as its largest single hole. Genesis and BlockFi survived the summer weakened and then collapsed after FTX failed in November 2022. Celsius, which filed in July 2022, had larger problems of its own. 3AC was not the only cause of the 2022 lending crash, but it was the first large domino.

The liquidators also alleged that the founders had kept spending as the fund failed. Court documents filed in July 2022 described a down payment on a yacht and a Singapore bungalow bought for about S$48.8 million. In June 2023 Teneo said it would seek $1.3 billion from Zhu and Davies personally.

Prison, a ban and a new exchange

The founders resurfaced in interviews, then in business. In early 2023 they backed OPNX, an exchange for trading claims against bankrupt crypto firms, built with Mark Lamb and Sudhu Arumugam of the failed lender CoinFLEX. It never took off and shut in February 2024.

Singapore moved against them in September 2023. On 14 September MAS banned both men for nine years from regulated financial activity, saying the fund had given it false or misleading information. Liquidators had obtained committal orders, court orders for imprisonment, after the founders failed to cooperate with the investigation. On 29 September 2023 Zhu was arrested at Changi Airport while trying to leave Singapore and was sentenced to four months for contempt. He was released before the end of the year, with time off for good behaviour, and was then questioned in a Singapore court about the fund's assets. Davies is subject to the same committal order but has never been arrested. In the US, liquidators asked a bankruptcy court in June 2023 to hold him in contempt for ignoring a subpoena they had served on him through Twitter.

In December 2023 a BVI court froze up to $1.14 billion of assets worldwide belonging to Zhu, Davies and Davies's wife, Kelly Chen.

Where the money stands

The liquidators have been collecting. In March 2025 Chief Judge John Dorsey of the US Bankruptcy Court in Delaware allowed 3AC to raise its claim against FTX from about $120 million to $1.53 billion. The liquidators allege FTX sold off 3AC's assets on the exchange just before the fund collapsed, a claim the FTX estate disputes. On 28 March 2024 the BVI court approved a first interim payout of up to $100 million to creditors, and further interim distributions have followed, according to Business Times reporting.

In August 2026 the Business Times reported a new claim. The liquidators are suing Zhu's wife, Dr Evelyn Tao Yaqiong, for about $40 million from the sale of a Dubai villa. They allege it was bought in 2022 for about $30 million with money from a $50 million crypto loan 3AC made to Zhu shortly before the collapse, transferred to her in October 2023 while Zhu was in prison, and sold in January 2024. Tao denies any knowledge of misuse of 3AC's assets and says the villa was a good-faith gift.

As of 16 October 2026 neither founder has faced criminal charges anywhere. Creditors are still waiting to learn how much of their money will come back.