Three Arrows Capital was one of the biggest crypto hedge funds, at one point managing over $10 billion in capital—

Until the founders dropped off the map.

A 1000-page legal document came out today, bringing clarity to the case.

I went through it. This is what I found:
To get you up to speed:

After making a series of large directional trades (GBTC, LUNA, stETH) and borrowing from 20+ large institutions, Three Arrows Capital (3ac) went bust.

Then the founders ran, and the loan defaults have lead to mass contagion in crypto.
As founders Su Zhu and Kyle Davies are nowhere to be seen, legal proceedings move forwards.

Today, a court document was leaked, one which asks the Singapore Government (where 3AC is based) to recognize liquidation proceedings and cooperate with liquidators.
While I don't have much legal background to speculate on the case, there are a lot of interesting tidbits to be gathered from the legal document:

• 3AC owes over $3b
• The biggest creditor is Genesis, with $2.3b loaned
• Default on debts contributed to insolvency of Celsius and Voyager Digital

2. The Timeline

Although rumors were floating around about big blowups ever since the Luna collapse, it seems like most creditors thought it was business-as-usual until early June.
May 11/12: Immediately post-Luna collapse several lenders ask about Luna exposure, 3AC says there is nothing to worry about.

May 18: Davies tries to prevent loans from getting called

June 3: Interest rates raised on loans due to market conditions
June 7: 3AC team pitches investors on new opportunity to save the company

June 10/11: Crypto options broker Deribit margin calls 3AC's account 'mobyDck'

June 13: Davies tries to arrange new loan from Genesis to pay margin call

June 16/17: 3AC insolvency widely reported
3. Reasonably Sized Yachts/Houses/Crimes

Between Sep 20 and June 22, Zhu bought two Singapore 'Good Class Bungalows' and a yacht that has yet to be delivered.

It's likely that borrowed money was used to fund it; the yacht was shown to lenders as proof of 3AC's creditworthiness.
It looks like there was some really suspicious movement of ETH and stablecoins just before 3AC was widely known as insolvent.

At one point, they made a down payment for the yacht while ignoring an outstanding loan payment.
Other potential crimes:

• Lying about extent of losses to lenders
• Lying about leverage and directional market exposure
• Movement of funds
• Not disclosing their liquidation to shareholders/creditors
4. The Business Structure

Some reporting has recently been done around TPS/Tai Ping Shan LTD, which is a legal entity related to 3AC and owned by Su Zhu and Kyle Davies' partner, Kelly Chen.

It was recently transferred $31m in stablecoins by a 3AC account.
As for Su Zhu and Kyle Davies (well, his wife), they're actually creditors in the suit against 3AC, claiming that 3AC owes them money.

That's not part of these documents, but it's wild enough to include.…
Recently, during online proceedings for liquidation, both Kyle and Su were on a call with cameras off and muted.
5. Is Contagion Over?

Hard to say, but it looks like most of 3ACs on-chain assets have been liquidated.

• 0x82ac5170a837f6554d518c71c0590723437e6b64
• 0x4862733b5fddfd35f35ea8ccf08f5045e57388b3

3AC NFT Wallet:
• 0x2e675eeae4747c248bfddbafaa3a8a2fdddaa44b
It's hard to imagine that Genesis, a subsidiary of Digital Currency Group that owns Grayscale (and the other below companies) is happy to eat a $2.3b loss, but so far they appear to be solvent.
Other DCG companies:
6. What's left?

Equity and token agreements in 3ACs illiquid investments, some of which have surely been sold off

JPEGs, including 'Crypto Dickbutt #1462'

Some are anticipating a mass sell-off of these NFTs, others imagine that the trading firm's Grayscale BTC shares might be liquidated, it might be sold already.

It's possible that 3AC's VC investments could negatively affect projects as token unlocks get sold off by liquidators.
7. How did this happen?

Well, it looks like these lenders just didn't do their homework. Take as an example:

• 3AC was asked to to 'keep them informed' if their leverage went above 1.5x

• Davies signed the below letter confirming over $2.3b in TAM
And when can you pay back the loan, by the way...?



More sure to come from me and others, as I couldn't read all 1000 pages.

Drop me a follow if you're interested in learning more about the assets and narratives shaping crypto (@jackniewold), and check out our newsletter, linked below:
Thanks to others following/tweeting about/reporting on the current situation:

even the servers liquidated, link here:…

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