LayerZero CEO Claims Kyle Davies Aimed for Complete Treasury Distribution Prior to 3AC’s Downfall

LayerZero co-founder and CEO Bryan Pellegrino has accused Kyle Davies, co-founder of the now-defunct Three Arrows Capital (3AC), of attempting to convince his company to transfer its entire treasury just prior to the liquidation of 3AC on March 21.

Pellegrino made this claim in a post on X in response to Davies’ remarks during a podcast.

Pellegrino Claims Davies Deceived & Took Advantage of Partners

Pellegrino asserted that Davies sought to acquire the complete treasury of LayerZero, “promising more favorable rates than other borrowers as a last-ditch effort.”

This information surfaced when the co-founder of the failed hedge fund declined to apologize to investors for the downfall of 3AC during an episode of the Unchained YouTube interview podcast on March 19.

The LayerZero CEO further stated that 3AC decided to borrow from multiple firms, despite being aware of its inability to repay the loans while privately preparing for its liquidation.

I would agree with this 100% and would be in your corner except for the fact that you tried to get us to give you our entire treasury promising better rates than other borrowers as a last gasp effort just days before you blew up.

— Bryan Pellegrino (@PrimordialAA) March 21, 2024

Pellegrino criticized Davies for misleading and exploiting friends, associates, and partners, including Arthur Hayes, the co-founder of the BitMex exchange.

While Pellegrino’s allegations appear rooted in feelings of betrayal and damaged friendship, he has garnered support from numerous crypto enthusiasts and observers who believe Davies borrowed funds under false pretenses.

You borrowed money with fraudulent claims. That’s simple financial fraud, and in a common sense ethical context…simple stealing. Losing other peoples’ money isn’t inherently unethical or illegal. But it’s both when you took their money under false pretenses. Don’t apologize…

— Ari Paul (@AriDavidPaul) March 21, 2024

Another user on X, @basedkarbon, also criticized Davies for his lack of tact in his response.

The Decline of 3AC & Effects on the Crypto Industry

Davies and Su Zhu established 3AC in 2012, and the fund reportedly managed approximately $10 billion in assets as of 2021. However, this value plummeted to $3 billion by April 2022.

The significant decline in 3AC’s fortunes was linked to the collapse of TerraUSD stablecoins in 2022, which triggered a crypto market crash that erased billions in value.

The now-defunct hedge fund filed for Chapter 15 bankruptcy on July 1, 2022, to safeguard its assets from creditors.

The collapse of 3AC had a profound effect on numerous investors and companies, as 3AC had an extensive list of early and late counterparties and organizations with funds tied up in the firm. The bankruptcy filing indicated that the hedge fund owed $3.5 billion to 27 companies, including $2.3 billion to Genesis Global Trading.

Furthermore, crypto trading platform Blockchain.com suffered a $270 million loss on loans to 3AC, while prominent digital asset brokerage Voyager Digital filed for Chapter 11 bankruptcy due to a default on approximately $670 million in loans extended to 3AC.

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