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Three Arrows Capital
Three Arrows Capital (also known as 3AC or TAC) was a Singapore-based cryptocurrency hedge fund which was ordered to liquidate on 27 June 2022 by a court in the British Virgin Islands. It was founded in 2012 by Kyle Davies and Su Zhu. The company borrowed billions of dollars to fund its trading, and according to July 2022 bankruptcy filings, faces $3.5 billion in creditors' claims. The fund appears to have lost in excess of $3 billion over 2021 and 2022, making its collapse one of the largest hedge-fund trading losses of all time.[citation needed]
Kyle Davies and Su Zhu first met at Phillips Academy, and both studied at Columbia University before working for Credit Suisse for brief spells before setting up Three Arrows in 2012. In its early years, the company was focused on arbitraging emerging-market foreign-exchange derivatives and engaged in the practice of finding mispriced derivatives on electronic platforms and keeping them even if banks asked to cancel or amend the trades. This strategy, however, resulted in the fund only earning fractions of a cent for each dollar that was traded. This practice continued until banks started to cut off the fund from that market in 2017, which began the company's shift to cryptocurrencies.
The fund's last public statement claimed a net asset value of $18 billion. Blockchain analytics firm Nansen estimated in March 2022 that Three Arrows managed about $10 billion in cryptocurrency assets, although there is speculation that most of their visible assets were sourced by uncollateralized borrowing from various lending platforms.[citation needed]
The firm's founders amassed a large following on Twitter with cryptocurrency-related topics. Su Zhu had more than 500,000 followers shortly before the fund failed. The firm backed projects including Aave, Avalanche, Luna, Worldcoin, BlockFi, Deribit, Ethereum, Polkadot, Solana, and WOO Network. According to a January 2021 SEC filing, Three Arrows owned almost 39 million units of Grayscale Bitcoin Trust (GBTC) at the end of 2020. The firm invested approximately $200 million in LUNA tokens in February 2022.
In April 2022 Bloomberg reported that Three Arrows was planning to move its headquarters to Dubai from Singapore. However, on June 24, 2022, Dubai's regulator confirmed that Three Arrows was not registered with the Dubai Financial Services Authority.
Cryptocurrencies experienced broad declines in the first half of 2022, with most tokens losing more than 50% of their market valuation. LUNA, in which Three Arrows had invested and Su Zhu actively promoted on Twitter, collapsed to near zero in May 2022. The spread between Grayscale GBTC trust unit prices and spot Bitcoin prices widened throughout 2021 and 2022, with the trust units trading at a 34% discount to the trust NAV on 17 June 2022.
A class action, Patterson v. TerraForm Labs Pte Ltd. et al., was filed against Three Arrows and others in the United States District Court for the Northern District of California on 17 June 2022. This case has since been dismissed.[citation needed]
On 30 June 2022, the Monetary Authority of Singapore (MAS) said it had reprimanded Three Arrows for breaching its allowed threshold of having no more than $250 million Singapore dollars in assets under management, a condition of its August 2013 fund management company registration. Three Arrows was further reprimanded for providing false or misleading information to MAS, and failing to notify MAS of changes to directorships or shareholdings.
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Three Arrows Capital
Three Arrows Capital (also known as 3AC or TAC) was a Singapore-based cryptocurrency hedge fund which was ordered to liquidate on 27 June 2022 by a court in the British Virgin Islands. It was founded in 2012 by Kyle Davies and Su Zhu. The company borrowed billions of dollars to fund its trading, and according to July 2022 bankruptcy filings, faces $3.5 billion in creditors' claims. The fund appears to have lost in excess of $3 billion over 2021 and 2022, making its collapse one of the largest hedge-fund trading losses of all time.[citation needed]
Kyle Davies and Su Zhu first met at Phillips Academy, and both studied at Columbia University before working for Credit Suisse for brief spells before setting up Three Arrows in 2012. In its early years, the company was focused on arbitraging emerging-market foreign-exchange derivatives and engaged in the practice of finding mispriced derivatives on electronic platforms and keeping them even if banks asked to cancel or amend the trades. This strategy, however, resulted in the fund only earning fractions of a cent for each dollar that was traded. This practice continued until banks started to cut off the fund from that market in 2017, which began the company's shift to cryptocurrencies.
The fund's last public statement claimed a net asset value of $18 billion. Blockchain analytics firm Nansen estimated in March 2022 that Three Arrows managed about $10 billion in cryptocurrency assets, although there is speculation that most of their visible assets were sourced by uncollateralized borrowing from various lending platforms.[citation needed]
The firm's founders amassed a large following on Twitter with cryptocurrency-related topics. Su Zhu had more than 500,000 followers shortly before the fund failed. The firm backed projects including Aave, Avalanche, Luna, Worldcoin, BlockFi, Deribit, Ethereum, Polkadot, Solana, and WOO Network. According to a January 2021 SEC filing, Three Arrows owned almost 39 million units of Grayscale Bitcoin Trust (GBTC) at the end of 2020. The firm invested approximately $200 million in LUNA tokens in February 2022.
In April 2022 Bloomberg reported that Three Arrows was planning to move its headquarters to Dubai from Singapore. However, on June 24, 2022, Dubai's regulator confirmed that Three Arrows was not registered with the Dubai Financial Services Authority.
Cryptocurrencies experienced broad declines in the first half of 2022, with most tokens losing more than 50% of their market valuation. LUNA, in which Three Arrows had invested and Su Zhu actively promoted on Twitter, collapsed to near zero in May 2022. The spread between Grayscale GBTC trust unit prices and spot Bitcoin prices widened throughout 2021 and 2022, with the trust units trading at a 34% discount to the trust NAV on 17 June 2022.
A class action, Patterson v. TerraForm Labs Pte Ltd. et al., was filed against Three Arrows and others in the United States District Court for the Northern District of California on 17 June 2022. This case has since been dismissed.[citation needed]
On 30 June 2022, the Monetary Authority of Singapore (MAS) said it had reprimanded Three Arrows for breaching its allowed threshold of having no more than $250 million Singapore dollars in assets under management, a condition of its August 2013 fund management company registration. Three Arrows was further reprimanded for providing false or misleading information to MAS, and failing to notify MAS of changes to directorships or shareholdings.