Three Arrows Capital

Three Arrows Capital (3AC or TAC), a Singapore-based cryptocurrency hedge fund, was founded in 2012 by Kyle Davies and Su Zhu. It became known for its aggressive investment strategies in the crypto market, borrowing billions to fund its trading activities. However, the fund faced a dramatic downfall, leading to its liquidation on June 27, 2022, by a court in the British Virgin Islands. This liquidation came after the fund incurred significant losses, estimated to be over $3 billion, making it one of the largest hedge-fund trading losses in history.

Davies and Zhu, who first met at Phillips Academy and later attended Columbia University, initially focused Three Arrows on arbitraging emerging-market foreign-exchange derivatives. However, by 2017, the fund shifted its focus to cryptocurrencies due to changes in the market. At its peak, the fund claimed a net asset value of $18 billion and was estimated to manage about $10 billion in cryptocurrency assets.

Three Arrows Capital was actively involved in backing various cryptocurrency projects, including Aave, Avalanche, Luna, and Ethereum. The fund also held a significant investment in Grayscale Bitcoin Trust (GBTC) and invested heavily in LUNA tokens in February 2022.

The fund's collapse was partly due to the broad declines in cryptocurrencies in the first half of 2022, with tokens like LUNA, in which 3AC had invested heavily, collapsing to near zero. This led to a series of regulatory and legal challenges, including a reprimand from the Monetary Authority of Singapore for exceeding its assets under management threshold and providing false information.

In the aftermath, the fund's founders faced legal issues, with Zhu being arrested in Singapore in September 2023 for failing to cooperate with the company's liquidators. The collapse of Three Arrows Capital had a significant ripple effect in the cryptocurrency market, contributing to the bankruptcy of crypto lender Voyager Digital and impacting other firms in the industry.