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The notorious fund that became the victim of the infamous Luna and TerraUSD crisis had significant exposure to FTX and its underlying FTT token, which could have been the reason behind the entity's eruption.
Zhu Su, the man behind the Three Arrows Capital fund, revealed in his most recent Twitter thread his fund's relationship with the prominent cryptocurrency exchange. The most interesting part is FTX's role in the fund's performance.
Reportedly, FTX HK employee Clement has been leaking 3AC's position on the market and other details to "many people" throughout the year. Technically, by leaking the information of one of the biggest funds in the industry, it becomes easier to liquidate most of its positions, causing a significant plunge in their performance.
We were all playing poker against the house, while they looked at our cards, and used our money to bet against us https://t.co/prFTE1IFNT
— Kyle Davies 🔺 (@KyleLDavies) November 15, 2022Advertisement
According to Kyle Davis, FTX CEO Sam Bankman-Fried had been hunting the fund, and it had a massive hole on its balance sheet. Technically, after the Terra implosion, most assets held by 3AC lost up to 80% of their value, causing the liquidation of the fund. This was the final blow to funds that were already on the verge of bankruptcy.
Arman ShirinyanTo be fair, SBF was not the only or the principal reason behind the fund's failure. Undercollateralized loans, illiquid positions and exposure to unstable projects are three main causes behind the bankruptcy of the fund.
However, the information that FTX and SBF personally had could have been easily used against the funds, especially in periods when it was most vulnerable and unable to provide liquidity to cover losses.
Alex Dovbnya
Dan Burgin
Vladislav Sopov