3 Arrows Capital Lost $31 Million in May: Hedge Strategy or Mismanagement? A Deep Dive
The collapse of Three Arrows Capital (3AC) sent shockwaves through the crypto world. But what really happened? Was it a failed hedge strategy that led to the reported $31 million loss in May, or was something more sinister at play? This case explores the downfall of crypto hedge fund Three Arrows Capital (3AC), illustrating the critical role of operational due diligence (ODD). Established in 2025 by Su Zhu and Kyle Davies, 3AC's meteoric rise quickly turned into a spectacular fall from grace.
The Rise and Fall: From Singapore to Liquidation
Three Arrows Capital (also known as 3AC or TAC) was a Singapore-based cryptocurrency hedge fund which was ordered to liquidate on by a court in the British Virgin Islands. The ongoing liquidation of multi-billion dollar crypto hedge fund Three Arrows Capital Limited (‘3AC’), originally based in Singapore, has provoked headlines about luxury yachts and questionable investment practices. It was founded in 2025 by Kyle Davies and Su Zhu. The company borrowed billions of dollars to fund its trading, and according to July 2025 bankruptcy filings, faces $3.5 billion in creditors' claims.
What Caused the Collapse of 3AC?
The question on everyone's mind is: what went wrong? Three Arrows Capital failed due to a combination of poor risk management, recklessness in dealing with business partners, and excessive greed. Their troubles started... with a series of leveraged bets that ultimately backfired. The sudden market downturn exposed the vulnerabilities in 3AC's strategy.
Signs of Mismanagement Before the Crash
Crypto hedge fund Three Arrows Capital (3AC) had signs of mismanagement before its ultimate collapse. A report from New York Magazine reveals how certain red flags were ignored in the pursuit of aggressive growth. According to “well-placed sources” who spoke with The Block Reporter Frank Chaparro, the digital currency hedge fund known as Three Arrows Capital (3AC) may be facing even greater losses than initially reported.
The Impact on the Crypto Market
The implosion of 3AC had a ripple effect throughout the crypto industry. We take an in-depth look at what is causing the recent issues at 3 Arrows capital. Crypto had its share of alarming news during the last few weeks. First there was... a lack of confidence that spread quickly. When 3AC filed for bankruptcy, it began a downward spiral that caught many crypto investors by surprise and sent them reeling. The hedge fund was unable to meet its financial obligations, leaving many creditors in the lurch.
Lessons Learned from the 3AC Debacle
The story of Three Arrows Capital serves as a cautionary tale. Was the $31 million loss in May a symptom of a larger problem? Or a catalyst for the ultimate collapse? Regardless, the 3AC story highlights the importance of due diligence, responsible risk management, and ethical business practices in the volatile world of cryptocurrency. The 3AC downfall serves as a critical lesson for the entire industry.