The disgraced founders of Three Arrows Capital spoke comprehensively about the catastrophic failure of their once-flying hedge fund after five weeks of hiding out. They said that they had received threats to their lives, which is why they remained under the radar.

Bloomberg reported on Friday that Su Zhu and Kyle Davies, both 35 years old, asserted that Three Arrows’ margin calls on loans that should never have been made because of their botched crypto investment are now descending.

Zhu and Davies blame the sudden downfall of Three Arrows to their wildly ambitious assumptions, with Zhu stating that they set themselves for a market “that never materialized.”

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The advisers in charge of liquidating 3AC stated in documents filed on July 8 that Zhu and Davies had not communicated with them and that the location of the firm’s founders was unknown. Zhu said they had no choice but to go into hiding because they were receiving death threats.

Three Arrows Founders’ Big-Time Failure

“People may call us stupid or delusional. And, I’ll accept that. Maybe. But they’re gonna… say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true,” Zhu said, according to Bloomberg.

Zhu and Davies presented a systematic failure of risk management in which the impact of improper bets was exacerbated by the easy availability of credit.

The duo admitted that the breakdown caused significant suffering, but largely avoided concerns regarding its impact on others in the cryptocurrency ecosystem. Instead, they accentuated their substantial losses while disputing charges that they had withdrawn funds from Three Arrows before its bankruptcy.

BTC total market cap at $451 billion on the daily chart | Source: TradingView.com

According to the paper, Zhu and Davies blamed the downfall of the hedge fund to excessive exposure to Terra, staked Ethereum, and Grayscale’s Bitcoin trust.  Zhu stated that he initially did not see any warning signs in the case of Terra.

“What we failed to foresee was that Luna was capable of plummeting to zero in a matter of days, and that this would spark a credit squeeze across the industry, putting enormous pressure on all of our illiquid assets.”

After the company “performed business as usual,” Zhu remarked, “Bitcoin climbed from $0 to $20,000, which was really difficult for us. That proved to be the final nail in the coffin.”

UAE Possible Hiding Place

The two founders, meanwhile, declined to disclose their current location. Nevertheless, one of the lawyers who engaged in the talk suspected that their eventual route was the United Arab Emirates, which has recently become a crypto hub.

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Featured image from Zhu Su/Twitter, Kyle Davies/Twitter, chart from TradingView.com