Three Arrows Capital Collapse Record: A Self-Destructive Path of a Textbook-Level Financial Scam
I spent three days sorting out the Three Arrows Capital collapse incident involving Su Zhu, which is more thrilling than any Wall Street blockbuster—only in the real world, there is no plot twist.
This Singaporean man was once a deity in the cryptocurrency world. In 2012, he was a trader at Deutsche Bank, and by 2021, he had amassed a fortune of billions through a cryptocurrency hedge fund. But peeling back his carefully crafted persona of an "investment genius" reveals a plethora of dangerous operations full of loopholes.
The craziest part was his funding game: first borrowing massive loans from institutions like BlockFi and Voyager, then using new debt to pay off old debt, like walking a tightrope on a razor's edge. Even worse, he reached into the wallets of industry bigwigs, treating the trust of top investment firms like an ATM. When he flaunted expensive NFTs on social media, no one realized that this gamble had already been teetering on the edge of a cliff.
The trigger for the collapse occurred in May 2022. The LUNA coin, heavily invested in by Three Arrows Capital, evaporated 99% of its value in 48 hours, instantly losing $500 million. But this was just the beginning—the domino effect triggered by Bitcoin's crash caused massive assets leveraged at 20 times to become instantly insolvent. When the value of collateral fell below the critical point and all creditors came knocking, Su Zhu's choice was to simply shut down and disappear.
The entire incident exposed three shocking facts:
The so-called "decentralized finance" is actually a house of cards relying on personal guarantees.
Super leverage is essentially financial opium; it makes you a god when you earn, and a nuclear explosion when you collapse.
The entire industry suffers from collective cognitive dissonance; everyone sees the risk but chooses to believe "this time is different."
Those investors who once idolized him are now filled with regret—they thought they were participating in a technological revolution, but in reality, they were just acting as bag holders. When Su Zhu was still promoting a "super cycle" just three days before the collapse, smart money had already quietly exited.
This collapse has sounded the alarm for all speculators: in the cryptocurrency world, there is no forever-rising curve, only a sickle that is always looking for new fodder. When someone tells you, "this time using leverage can earn ten times," first think about how they plan to handle the risk of a tenfold loss.
