3AC’s troubles might have started earlier this year after Zhu Su’s (one of 3AC’s co-founders) cryptic tweets stating that the company is “fully committed to working this out” and is “in the process of communicating with relevant parties.” Although there was no follow-up as to what specific issues were being referred to, the Financial Times reported that crypto lenders BlockFi and Genesis had liquidated some of their 3AC positions after the announcement. After that, it wasn’t very long afterward that terraUSD and Luna collapsed.
In May of 2022, Terraform Labs’ terraUSD (UST) – the most popular dollar-pegged stablecoin project – collapsed from about $60 billion to nearly $0 and wiped out investors’ money in what felt like mere seconds in a panicked sale that spread across the entirety of the space.
The Wall Street Journal reports that 3AC had invested $200 million in Luna.
In comparison, other industry reports put their exposure at around $560 million, but whatever the loss was, that investment was rendered almost completely worthless following the fall of the stablecoin project.
The collapse of UST shook the confidence in the sector and exacerbated the fall in the price of cryptocurrencies which were already facing a broader pullback. Shortly after UST’s fall from grace, 3AC’s lenders naturally came demanding some of their investments, but as the money wasn’t there, many of the firm’s business partners could not meet these demands.
One of the biggest of these partners was the digital asset brokerage firm Voyager Digital, which ultimately lost out, causing them to file bankruptcy after 3AC defaulted on their 670 million dollar loan.
Blockchain.com had also lost out on its $270 million loans, although its size allowed them to avoid bankruptcy for the time being. According to 3AC co-founder Kyle Davies in a WSJ interview earlier this month, “the Terra-Luna situation caught us very much off guard.”
3AC’s solvency liability came only weeks after turbulence in the crypto markets, which pulled the market cap from the November peak of $3 trillion in 2021 to where it sits today, hovering at a little over $900 million.
As of June 2022, liquidators announced that they could not locate either 3AC’s founders, Zhu Su or Kyle Davies.
They say neither party has yet to cooperate in the liquidation effort, and concerns have been raised that these founders or other parties will take off with 3AC’s assets. So far, the investigators are in the dark, and none of their questions have been answered.
Adding to the mystery, over a recent Zoom call, Su and Davies names had appeared, but their video was turned off, and they were on mute the entire time. Also, when the liquidators stopped by 3AC’s Singapore office, the door was locked, and mail was piled up outside the door, with neighbors reporting that no one had been in the offices since late May.