Three Arrows Capital Collapse — June 2022
The 10-billion-dollar crypto hedge fund failed margin calls on leveraged LUNA, GBTC and staked-ETH positions, triggering a cascade through Voyager, Celsius and BlockFi.
Three Arrows Capital was Singapore-based with operations spanning Hong Kong and later the United Arab Emirates. Co-founders Su Zhu and Kyle Davies built the fund through arbitrage and momentum strategies before pivoting to leveraged crypto positions in 2020-2021.
By Q2 2022 the fund held large positions in three loss-making trades: LUNA tokens accumulated before the Terra collapse, the Grayscale Bitcoin Trust at a persistent discount to NAV, and leveraged stETH-versus-ETH positions in the staking-derivative market. As markets fell and the Terra collapse erased one of the positions entirely, margin calls cascaded from multiple lenders.
On 27 June 2022 a British Virgin Islands court ordered the fund into liquidation. Voyager Digital, which had lent 3AC approximately $670 million, filed for bankruptcy on 5 July. Celsius had suspended withdrawals on 12 June. BlockFi and Genesis would file in November 2022 and January 2023 respectively, each citing 3AC exposure as a contributing factor.
The Singapore Monetary Authority issued a nine-year prohibition order against Su Zhu and Kyle Davies in September 2022. Su Zhu was arrested in Singapore in September 2023 for contempt of court orders to disclose the fund's assets and served a four-month sentence.
Timeline
- Terra/UST collapse erases 3AC's LUNA position
A position publicly disclosed at approximately $200M is wiped out within days.
- First margin calls from lenders
Voyager Digital, Genesis and BlockFi separately demand collateral against 3AC loans. 3AC fails to respond.
- BVI court orders liquidation
Teneo Restructuring appointed as joint liquidators.
- Voyager Digital files for Chapter 11
Citing $670M in unrecoverable loans to 3AC as the primary cause.
- Singapore MAS issues 9-year prohibition order
Su Zhu and Kyle Davies barred from regulated activities in Singapore.
- Su Zhu arrested at Changi Airport
Detained on civil contempt charge for non-cooperation with liquidators.
Who was involved
- Kyle Daviespersonenabler
- Su Zhupersonenabler
- Three Arrows Capitalprojectvictim
Legal record
- Lead Court
- BVI Eastern Caribbean Supreme Court
- Liquidators
- Teneo (Russell Crumpler, Christopher Farmer)
- Su Zhu Arrested
- 2023-09-29
- Su Zhu Sentence
- 4 months contempt
- Kyle Davies Status
- at large
- Liquidation Ordered
- 2022-06-27
Structural failures identified
Related records
Sources
- MAS reprimand of Three Arrows Capital, Monetary Authority of Singapore — Regulatory finding
- Three Arrows Capital liquidation portal, Teneo — Liquidator filings