Trading & Options · Profile from Trading and Options Research Companion
Three Arrows Capital
The crypto hedge fund that Su Zhu and Kyle Davies, two former Credit Suisse traders, started as a small trading firm (the fund company was incorporated in the British Virgin Islands on 3 May 2012 — liquidator's declaration) and ran from Singapore, where its manager was registered with the Monetary Authority of Singapore (MAS) from August 2013 with a cap of S$250m under management (MAS, 30 Jun 2022). By 2021 it was one of the best-known crypto funds in the world. Its signature trade was a structural one: subscribing bitcoin into the Grayscale Bitcoin Trust (GBTC) at net asset value through private placements, holding the shares through a lock-up, and hoping to sell or hedge them while GBTC traded at a premium. Its SEC filings show 21,057,237 GBTC shares (6.26%) in June 2020 and 38,888,888 shares (6.1%) at 31 Dec 2020. When the premium became a discount in 2021, the basis trade became a directional position; the firm then borrowed heavily, largely without full collateral, from crypto lenders — Genesis alone lent $2.36bn (Genesis, reported Jul 2022) — and bought large directional positions, including ~$200m of LUNA (Davies, Dec 2022, reported) and leveraged staked-ether (stETH) positions. Terra's collapse in May 2022 and the market fall that followed left it unable to meet margin calls (>$400m of liquidations by mid-June, Fortune, as cited by the liquidators). It applied for its own liquidation on 27 Jun 2022; the British Virgin Islands (BVI) Commercial Court appointed Teneo's Russell Crumpler and Christopher Farmer as joint liquidators on 29 Jun 2022, and the liquidators filed for US Chapter 15 recognition in New York on 1 Jul 2022 (Crumpler declaration, SDNY case 22-10920). Creditors filed 154 claims worth ~$3.4bn (Teneo, Dec 2023, reported). For the edge equation 3AC is the case of a basis trade that turned directional: a small, real structural edge, scaled with other people's unsecured money, became a leveraged bet on crypto prices and a counterparty event for the whole lending industry.
At a glance
- Founded
- Three Arrows Capital Ltd incorporated in the BVI on 3 May 2012, co-founded by Kyle Davies and Su Zhu (Crumpler declaration, 1 Jul 2022). The Singapore manager, Three Arrows Capital Pte. Ltd. (TACPL), obtained registered fund management company (RFMC) status in Aug 2013 (MAS, 30 Jun 2022)
- Headquarters
- Singapore; a planned move to Dubai reported in Apr 2022 (Bloomberg, via Wikipedia — verify); Dubai's regulator said on 24 Jun 2022 that the firm was not registered with it (reported)
- Ownership / structure
- Private. The BVI fund company's "management shares" were wholly owned by TACPL; its directors were Davies, Zhu and a BVI resident (Crumpler declaration). Fund management was "novated" to a BVI entity from 1 Sep 2021, which MAS later called misleading because Zhu was a common shareholder (MAS, 30 Jun 2022)
- Type
- Crypto hedge fund / blow-up; this profile is a single-event entity with seven moves (rule 6)
- Founders
- Su Zhu (CEO and director of TACPL) and Kyle Livingston Davies (chairman and director) (MAS, 14 Sep 2023); both studied at Columbia and worked at Credit Suisse before founding the firm (Wikipedia — verify dates)
- Scale (dated, reported)
- GBTC holdings 21.1m shares (event date 2 Jun 2020) and 38.9m shares (31 Dec 2020) (SEC Schedule 13G and 13G/A); "over $3bn" of assets under management in April 2022 (WSJ, cited by the liquidators); ~$10bn of crypto assets in March 2022 (Nansen, via Fortune — an on-chain estimate, not audited); a last public NAV statement of $18bn (Wikipedia — verify); Davies later called it "a $4-plus-billion fund" (Dec 2022 podcast, reported)
- Borrowing (reported)
- Genesis $2.36bn lent; Voyager 15,250 BTC + $350m USDC (~$650–675m by date of pricing); other lenders including BlockFi and Celsius (amounts not confirmed — verify)
- Loss and claims
- 154 creditor claims of ~$3.4bn, ~$2.7bn expected to be admitted; assets ~$1.16bn at 18 Dec 2023; estimated recovery 45.74% (Teneo report via The Block, 21 Dec 2023)
- Regulators and courts
- MAS (Singapore); BVI Financial Services Commission and the BVI Commercial Court; US Bankruptcy Court, SDNY (Chapter 15); the Singapore High Court (recognition, committal); the US Bankruptcy Court in Delaware (3AC's claim against FTX)
- Signature moves (incl. failures)
- Founding and Singapore registration (2012–13); the GBTC premium trade (2020–21); leveraged directional bets on borrowed money (2021–22); LUNA, stETH and the margin calls (May–Jun 2022); BVI liquidation and Chapter 15 (Jun–Jul 2022); MAS reprimand and prohibition orders (2022–23); claims against the founders, freezing orders and the FTX claim (2023–26)
7 strategic moves analysed
Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.
2012
Founding and Singapore Registration
Founding or fund launch
2020
GBTC Premium Trade
New strategy — structural arbitrage (closed-end fund premium)
2021
Leveraged Directional Bets and Unsecured Borrowing
Leverage, sizing or risk-limit change / strategy pivot
2022
BVI Liquidation and Chapter 15
Restructuring, bailout or liquidation
2022
LUNA stETH and the Margin Calls
Loss, drawdown or blow-up response
2022
MAS Reprimand and Prohibition Orders
Regulatory, enforcement or legal action
2023
Founder Claims Freezing Orders and the FTX Claim
Regulatory, enforcement or legal action