Recently, Bryan Pellegrino, the co-founder and CEO of MidjourneyLayerZero, came forward with serious allegations against Kyle Davies, the co-founder of the now-defunct Three Arrows Capital (3AC). Pellegrino accused Davies of attempting to persuade his firm to transfer its entire treasury in a last-ditch effort before the liquidation of 3AC. According to Pellegrino, Davies promised better rates than other borrowers to entice the transfer, which ultimately failed.
This revelation came to light when Davies refused to apologize to investors for the collapse of 3AC during an interview on the Unchained YouTube podcast. Pellegrino’s criticism of Davies centered around the belief that Davies misled and took advantage of friends, associates, and partners, including prominent figures like Arthur Hayes, the co-founder of BitMex. The allegations of borrowing funds under false pretenses have sparked outrage among many in the crypto community.
Three Arrows Capital, founded by Davies and Su Zhu in 2012, once managed an estimated $10 billion in assets as of 2021. However, by April 2022, that value had plummeted to $3 billion. The collapse of 3AC was largely attributed to the crash of TerraUSD stablecoins in 2022, which triggered a broader crypto crash. The hedge fund ultimately filed for Chapter 15 bankruptcy in July 2022 to protect its assets from creditors, leaving a trail of devastation in its wake.
The fallout from the 3AC collapse was significant, with numerous investors and companies suffering heavy losses. The bankruptcy filing revealed that 3AC owed $3.5 billion to 27 different companies, including a whopping $2.3 billion to Genesis Global Trading. Other entities, such as Blockchain.com and Voyager Digital, also faced substantial losses due to their involvement with 3AC. The reverberations of 3AC’s demise were felt far and wide across the crypto community.
The allegations against Kyle Davies and Three Arrows Capital paint a troubling picture of deception and financial mismanagement. The collapse of 3AC serves as a cautionary tale of the dangers of operating in the volatile world of cryptocurrency and the importance of transparency and accountability in all financial dealings. The fallout from this scandal will likely have long-lasting repercussions for all involved, serving as a stark reminder of the risks inherent in the crypto industry.
