As Digital Currency Group (DCG) fuels rumours about its solvency, Zhu Su, the co-founder of the now-defunct Three Arrows Capital (3AC) fund, is accusing the company of orchestrating Terra’s collapse alongside FTX. Whatever the truth behind this story, the crypto community has been quick to remind Zhu Su of his own management mistakes.
Did Digital Currency Group and FTX cause Terra’s downfall?
It’s no secret to anyone who follows the cryptocurrency ecosystem closely, the crashes of Terra and FTX took many companies and other projects with them. Among those that didn’t survive 2022 was investment fund Three Arrows Capital (3AC), one of whose co-founders, Zhu Su, accused FTX and Digital Currency Group (DCG) of not only orchestrating Terra’s downfall, but also trying to destabilise stETH:
Here’s rough summary of dcg situation
1) they conspired w FTX to attack Luna and steth and made a fair bit doing so
2) they took substantial losses in the summer from our bankruptcy as well as Babel, and other firms involved in gbtc
3) they could’ve calmly restructured then
– Zhu Su (@zhusu) January 3, 2023
While it is not for us to judge whether these accusations are well-founded or not, Zhu Su’s exit comes at a perfect time. Indeed, Cameron Winklevoss has just accused Barry Silbert, DCG’s CEO, of holding up the repayment of the $900 million that Genesis, a subsidiary of DCG, owes to Gemini.
Zhu Su says DCG and FTX mismanaged their losses
After the fall of Terra, the GBTC’s anchoring problems and the bankruptcy of his own fund, Zhu Su believes that FTX and Digital Currency Group failed to manage the losses that this caused in their treasury.
He likens the situation to a child losing at poker, but telling the dealer that his father would be there to pay, when in reality no one can pay the debt:
4) instead they fabricated a left pocket right pocket callable promissory note that magically filled the hole. This is like a kid losing at poker and saying “I am fine, my dad will pay you, let me keep playing,” but if your dad is actually yourself
– Zhu Su (@zhusu) January 3, 2023
Regardless of the veracity of these accusations and the links between all the people and entities cited, the crypto community was quick to remind Zhu Su that his own position was likely to taint the relevance of these remarks.
Following his thread, several people did comment on the mistakes Zhu Su made that led to the failure of Three Arrows Capital, such as his “supercycle theory”, while others advised him to deal with his own litigation first:
How about you pay your creditors first before talking about others
– Dr. Stephen Andrews (@Stephen_Andr41) January 3, 2023
While it’s not possible to get to the bottom of this story at this point, it’s certain that the many business links between these companies have exacerbated this chain of failures, and that this could lead to the downfall of other players in turn.
