3AC’s Kyle Davies tried to lure LayerZero to entrust entire treasury days before collapse, CEO Pellegrino claims

Companies • March 22, 2024, 3:36AM EDT

Published 1 minute earlier on

UPDATED: March 22, 2024, 3:39AM EDT

Quick Take

LayerZero Labs CEO Bryan Pellegrino alleged that Davies offered higher interest rates to lure the company to commit its entire treasury to 3AC days before it collapsed.
Davies recently said in an interview that he was not sorry for investors in 3AC that lost money.

Kyle Davies, co-founder of Three Arrows Capital, attempted to lure LayerZero to allocate the project's entire treasury to the now-defunct crypto hedge fund just days before it imploded, LayerZero Co-Founder and CEO Bryan Pellegrino alleged on X Thursday.

Davies, who refused to apologize to investors for billions lost in 3AC’s bankruptcy in a recent podcast interview, reiterated his unapologetic view on the hedge fund’s collapse in an X post Thursday. “We were traders who devoutly believed in up only forever. Still do. Lenders chose to gamble their own low risk clients funds on a high risk thesis,” Davies wrote.

Pellegrino threw his allegation in a reply to that X post, claiming that Davies promised the interoperability protocol LayerZero “better rates than other borrowers" in a "last gasp effort” before the collapse. “Getting liquidated is one thing, lying and exploiting your friends, portcos, and people around you is another,” said the LayerZero chief.

Pellegrino also claimed that 3AC was insolvent when it offered the deal to LayerZero. Davies did not reply to Pellegrino's X posts as of publication time.

3AC Implosion

3AC, once a prominent hedge fund manager in the crypto sector that managed assets over $3 billion, filed for Chapter 15 bankruptcy in July 2022 after running into liquidity issues following the collapse of Terra-Luna in May of that year.

Its co-founders Davies and Su Zhu moved on to launch Open Exchange, or OPNX, a crypto derivatives and claims trading platform in April 2023. However, the platform closed down earlier this year in February.

While Zhu was arrested in Singapore last September and remained imprisoned until December for failing to cooperate with investigations related to 3AC’s liquidation, Davies was not apprehended as he remained outside of the city-state. Davies said in a recent podcast interview that he would actively avoid returning to Singapore to dodge jail time.

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About Author

Danny Park is an East Asia reporter at The Block writing on topics including Web3 developments and crypto regulations in the region. He was formerly a reporter at Forkast.News, where he actively covered the downfall of Terra-Luna and FTX. Based in Seoul, Danny has previously produced written and video content for media companies in Korea, Hong Kong and China. He holds a Bachelor of Journalism and Business Marketing from the University of Hong Kong.