Bryan Pellegrino, the co-founder and CEO of LayerZero, has accused Kyle Davies, the founder of Three Arrows Capital, of attempting to convince LayerZero to transfer its entire treasury to the now-defunct crypto hedge fund just before its collapse. Pellegrino made this claim in response to a post on X, stating that Davies promised LayerZero better rates than other borrowers as a last-ditch effort before the collapse. Pellegrino expressed his frustration, stating, “Being liquidated is one thing. Lying and taking advantage of your friends, partners, and people around you is another.” However, Davies has not responded to Pellegrino’s accusations on X.
In an episode of the Unchained Podcast, Davies refused to apologize to investors for the billions lost in 3AC’s bankruptcy and the subsequent collapse. He remained firm in his belief that his professional reputation was still intact, despite facing significant backlash on social media. Davies wrote on X, “We were traders who strongly believed in the market always going up. And we still do. Lenders chose to gamble their low-risk clients’ funds on a high-risk thesis.”
However, Pellegrino criticized Davies for misleading and taking advantage of associates and partners. He further claimed that 3AC was financially unstable when proposing the arrangement to LayerZero. At the time of publication, Davies had not responded to Pellegrino’s posts on X.
Following the collapse of Terra in May 2022, 3AC, a prominent crypto hedge fund manager with over $3 billion in assets, filed for Chapter 15 bankruptcy in July of the same year due to liquidity challenges. Davies and Su Zhu, the co-founders of 3AC, later launched Open Exchange (OPNX), a platform for crypto derivatives and claims trading, in April 2023. However, the platform ceased operations in February of this year.
On January 5, 2023, Davies and Zhu were subpoenaed via X for avoiding communication with the relevant authorities and failing to cooperate satisfactorily with liquidators. Zhu was arrested in Singapore last September and remained in jail until December for non-cooperation in 3AC’s liquidation inquiries. Davies, on the other hand, managed to avoid apprehension.
On December 21, a court in the British Virgin Islands froze $1.14 billion worth of Davies and Zhu’s assets. The liquidator of 3AC, Teneo, is seeking to recover $1.3 billion directly from Zhu and Davies, alleging that they took on significant leverage with investor funds after 3AC became insolvent.
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