A Timeline of the Three Arrows Capital Collapse

By now everyone is aware of the Three Arrows Capital (3AC) debacle. The fund somehow managed to fumble away a total of at least $3.5 Billion from 33 lenders.  Court details of the liquidations of the creditors were leaked on July 18th but have been currently taken down. 

A saved version of the court doc may be found here.

Screenshots of the document show that Su Zhu and Kyle Davies purchased at least one yacht with consumer funds. Also leaked, were a breakdown of the creditor claims.

Timeline

Early May: Terra Luna de-pegs and collapses to zero. Do Kwon is suspected of funneling funds for himself. Market prices of Bitcoin and crypto drop which caused liquidations throughout the market. 

May 12th: Luna collapse prompts creditors to message 3AC asking about their Luna exposure. Su Zhu responds that there is nothing to fear and Luna positions are publicly known. No leverage long positions.

Mid June: It is confirmed that liquidations did cause a 3AC collapse and insolvency. The company is linked to liquidations that brought Bitcoin’s price as low as $17,500 while other cryptocurrencies suffered larger losses.

July 1st: Voyager suspends withdrawals, trading, and deposits.

July 1st: FTX has the option to buy BlockFi for $240 million and included a $400 million revolving credit facility for the platform.

July 2nd: 3AC confirms their collapse and files for bankruptcy.

July 6th: Voyager files for Chapter 11 bankruptcy making retail the last creditor to get funds returned.

July 8th: Blockchain.com announces losses from a Three Arrows Capital loan totaling $270 million.

July 18th: Court documents from Singapore are leaked. Here is what we know:

• User funds were used to make down payments on yachts as proof of 3AC’s good standing.
• 3AC had most of its trading done by an entity called TPS (Tai Ping Shan LTD) owned by Su Zhu, Davies, and Davies' wife. Suspicious transactions occurred between TPS and 3AC, one of which is 3AC owing Davies’ wife $65 million as a creditor.
• Davies and Su Zhu appeared in court, but the cameras were off and they were always on mute. Their whereabouts are currently unknown at this time.

These developments brought to light the irresponsible trading activities of major CeFi lenders such as Celsius. Now whistleblowers are stepping up to unveil the manipulation that was occurring with the Cel token and was being actively traded by employees. 

Celsius even hired a known Israeli money launderer without conducting a background check. 

Contagion From 3AC Might Be Over, but We Are Only Beginning To Understand the Manipulation Behind the Scenes

• 3AC rehypothecated money from retail and CeFi companies like Voyager, BlockFi, Genesis and others. The company then used the money to take irresponsible risks with Luna and other DeFi projects. Not to mention using funds for personal use like purchasing yachts. 
• Celsius used customer funds to buy its own token to pump the price and then take loans against the artificial price pump. 
• BlockFi strikes a deal with FTX to be purchased for cents on the dollar.

3AC’s effect on price might be subsiding for now, but the aftershock and contagion occurring in the CeFi companies is only beginning. Many are restructuring to stay afloat, but it is unlikely that the most affected will survive. Regulators will be salivating to get into DeFi to make it more difficult for these types of asset structures to be built and attempt to protect retail. 

It would be hard to argue against when the real people affected by these acts are the people who trusted CeFi lenders with their money for a fixed yield. If there is one thing we know for sure, it is that we can anticipate more fallout from the 3AC contagion.

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Hodl D.