3ac-capital-minThree Arrows Capital filed for bankruptcy after defaulting on an over $680 million loan from Voyager Digital. The co-founders of the crypto investment firm, Zhu Su and Kyle Davies shave now revealed close ties to the co-founder of the troubled Terraform Labs, Do Kwon.

The 3AC co-founders were speaking during an interview with Bloomberg, admitting that they were overconfident on Terra Luna. Zhu Su and Kyle Davies had gone missing for around five weeks before resurfacing during the Bloomberg interview.

3AC co-founders were overconfident about Terra

The two founders of the bankrupt crypto hedge fund have admitted that they were overconfident following a multi-year bull market. The prolonged bull market had increased the value of crypto lenders, which saw their valuation grow because of support from firms such as 3AC. However, this also resulted in poor decision-making.

Zhu also said they had a close relationship with the co-founder of Terraform Labs, Do Kwon. Zhu and Davies believed that Terraform Labs would do great things. However, because of this close relationship. 3AC failed to pay close attention to any red flags. After Terra collapsed in May, 3AC’s investment of $500 million in the project plunged to zero.

Zhu further explained that they could have seen the unsustainable growth of the Terra ecosystem and withdrawn their funds before the collapse happened. The crypto community has argued that the Anchor protocol, a crypto staking protocol that collapsed following the UST depeg, was unsustainable.

Bitcoin’s plunge deepened 3AC woes

The co-founders also admitted that the collapsed LUNA token that has since been renamed Luna Classic (LUNC) caused negative side effects to the crypto hedge fund. 3AC’s financial woes deepened after Bitcoin’s price fell below $20,000, and the crypto hedge fund could no longer access additional credit.

According to Zhu, 3AC continued its normal operations even after Terra Luna collapsed. The main blow was dealt to the company after Bitcoin dropped to 2020 lows, and this was the last nail in the coffin.

The 3CA co-founders also explained their disappearance after 3AC went under, saying that they had received death threats and had gone into hiding. They also failed to disclose their current location, adding that they had plans to relocate to Dubai.

Zhu and Davies further denied that they had withdrawn funds from 3AC before the firm filed for bankruptcy. They also addressed the allegations of the $50 million yacht mentioned in the court case, saying the yacht was purchased more than a year ago and that any transactions leading to the purchase of the boat had “a full money trail.” They added that the yacht was to be used in Europe.

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