Two Blockchain Sleazebags May Have Crashed The Entire Crypto Market
The crypto market took over a decade, millions of both seasoned and amateur investors, and a few super annoying Super Bowl ads to build. But according to a new report from New York MagazineIt may have only taken two of the most sinister cryptbros around to bring the industry to its knees, both believed to be on the run.
Who, you ask, can these poor people be? Su Zhu and Kyle Davies, according to the charges, the still-missing founders of imploded crypto hedge fund Three Arrow Capital (3AC), which filed for bankruptcy last month. The couple – believed to be still on the lam, sadly without their new, stupidly titled megayacht – over-borrowed and over-promised, while sweeping insolvency under the rug. When the project eventually collapsed, so did those who loaned them millions and even billions of dollars—probably resulting in a market crash that caused a full trillions dollars to just evaporate.
“I suspect they could be 80 percent of the total initial contagion,” said Sam Bankman-Fried, CEO of crypto exchange FTX, NEW Mag, citing Three Arrows’ alleged responsibility for the wider market crash. “They weren’t the only ones to blow out, but they did it a lot bigger than anybody else did. And they had a lot more trust from the ecosystem before that.”
As NEW Mag details, 3AC’s success was built on two of the flimsiest things around: social media influence and heavy borrowing. Zhu amassed a large following on Twitter, where he would make wild claims about the market’s “superbikes,” urging crypto-happy followers to just keep buying — no matter what the market looked like at face value.
However, the couple’s outgoing bravado appears to have been a complete front. They borrowed huge amounts of money from new investors – including $66 million from Zhu’s wife — to pay off old debts, and in retrospect it seems abundantly clear that they were very much aware that their operation was in fact insolvent. Which is really just a Ponzi scheme.
“The numbers they reported in May were very, very wrong,” Lane Kasselman, chief business officer at Blockchain.com, told NEW Mag. “We’re convinced they committed fraud. There’s no other way to put it – it’s fraud, they lied.”
Blockchain.com, in particular, lost $270 million in unpaid loans to 3AC, and he has since laid off about a quarter of his staff. Among other victims were the crypto exchange Voyager, which has since gone bankrupt and swallowed all user funds, and Genesis Global Trading, which NEW Mag says 3AC borrowed $2.8 billion — a sum that will likely never be repaid.
The duo have also been accused of borrowing money from organized crime, which may indeed be why they are now in hiding. Eep!
So far, liquidators have only been able to recover a paltry $40 million of 3AC’s one-time billions. Still, even if all the money in the portfolio were somehow recovered, those billions would hardly be enough to reverse the colossally destructive dominoes that the firm’s implosion caused — perhaps proving, once and for all, that the crypto market is less wild. West and more house of cards.
“They used to boast that they can borrow as much money as they want,” said an unnamed trader who knew the couple in Singapore. NEW Mag. “This was all planned, man, from the way they established credibility to the way the fund was structured.”
Neither Zhu nor Davies responded NEW Magits request for comment, except for an automated email response from Davies that read “Please note that I am not in the office at this time.”
READ MORE: The cryptogenies that vaporized a trillion dollars [New York Magazine]
More on the cowardice of these truly awful hedge honchos: Crypto Hedge Fund Founders Leave Hq and Disappear After Implosion
