$150 million ‘Much Wow’ yacht left behind after crypto hedge fund’s collapse

Last Updated on: 16th August 2022, 05:26 am

The bankruptcy-plagued Three Arrows Capital (3AC) had a history of mismanagement before the ultimate cryptocurrency hedge fund collapse. A report by New York Magazine shows how 3AC founders Kyle Davies and Su Zhu received criticism from banks and other traders before the firm entered the cryptocurrency market.

In the early years, 3AC, a Singapore-based company 3AC started to get into forex (FX) trading. They were reportedly involved in something known as the practice of currency arbitrage which permitted Zhu and Davies to cash in on inaccurate quotes from various brokers even if they made only “fractions of a cent on each dollar traded.” According to New YorkMagazine, banks could sometimes call 3AC to stop or modify their trades, and the company would reject. The banks reportedly started cutting off 3AC as early as the year 2017.

“We FX traders are partly to blame for this because we knew that these guys were not able to make money in FX,” an ex-FX trader spoke to New YorkMagazine. “But when they came to crypto, everyone thought they were geniuses.”3AC’S CO-FOUNDERS ARE BELIEVED TO BE IN HIDING

When 3AC moved to trade cryptocurrency, it was able to achieve that it could be successful in using the same principles for currency arbitrage in the marketplace. However, New YorkMagazine notes that investors realized something “might be off” about the company in 2019 when it proposed to sell the stake it held in the crypto options exchange called Deribit that was offered for sale at an overpriced price that was $700 million. The actual amount for the stake was less than $289 million. 3AC did not realize that it was “attempting to flip a portion of its investment at a steep markup, essentially netting the fund an enormous kickback.”

The co-founders of 3AC later boasted about the company’s investment of $2 billion into GBTC (Grayscale Bitcoin Trust) however, the company was reported to have taken far too long to sell its stake and then saw its gains disappear. According to New YorkMagazine, Davies acknowledged that he was aware the value of GBTC would drop during a show created by venture capitalist company Castle Island and later asked to have the show’s producers cut this part out before the show went on air (which was done).

3AC also placed a huge bet on Terra and its coin Luna, which crashed after it fell off its dollar-dollar peg in May. Herbert Sim, a Singapore-based investor who analyzed 3AC’s wallets, revealed to New YorkMagazinethat 3AC’s holdings fell from about $500 million to only $604 after the crash. According to an interview in the Wall Street Journal, Davies and Zhu admitted that 3AC suffered losses of $200 million; however, they said that they’ve “always been crypto believers” and “still are.”

This is how we got here. 3AC declared bankruptcy in the month of March and brought down the crypto-based broker Voyager Digital along with it. The crypto billionaire and founder and CEO of FTX exchange Sam Bankman-Fried blamed 3AC for creating the ripple effect that caused crypto firms to declare bankruptcy or block transactions. “I suspect they might be 80 percent of the total original contagion,” Bankman-Fried stated in a statement in an interview with New YorkMagazine. “They weren’t the only ones who died, but they did it more than anybody else. And they had far more confidence from the community before this.”

The 3AC’s founders and co-founders have been reported to be hiding as lenders cannot locate them. According to New York Magazine, theories have been floating around that the company stole money from people associated with organized crime, which is why the co-founders disappeared without a trace. 3AC has been reported to have routed an amount of $32million in stablecoins to the Cayman Islands. The Cayman Islands. It’s an area that the wealthy often utilize as a way of laundering funds because of its lenient tax laws.

The month before, Zhu and Davies were interviewed by Bloomberg in an “undisclosed location” and told the publication that they would be traveling to Dubai, a country where they are not allowed to travel. US or Singapore has no extradition agreements. The two leave with a luxury yacht worth $150 million named “Much Wow” known as “Much Wow,” about the Doge meme, and a 30 million Singaporean mansion which Zhu has previously considered for sale.