Insights into the Co-Founder of Three Arrows Capital

The Rise and Fall of a Crypto Empire

Su Zhu's journey from an ordinary trader to a crypto tycoon is a cautionary tale that shook the cryptocurrency world. In 2012, he was just another trader at a major bank. By 2021, he had become a prominent figure in the crypto space, co-founding a hedge fund that was making waves across the industry.

A Success Built on Borrowing

Zhu's strategy was simple yet risky - extensive borrowing. His fund became a borrowing machine, taking loans from various lenders in the crypto space. Most of this borrowed money was used to secure even more loans, creating a precarious financial structure.

This approach, while appearing successful on the surface, was a highly vulnerable financial game. As the leverage increased, the potential for collapse grew exponentially.

The Illusion of Wealth

While discussing "supercycles" on social media, Zhu was spending millions on rare NFTs. To many, his wealth seemed like a solid pyramid, but in reality, it was a house of cards waiting to collapse. What appeared to be crypto industry wealth was actually borrowed funds. The trust he garnered from industry veterans was built on overextended leverage, and investments from other hedge funds were flowing into an unsustainable financial structure.

The LUNA Crash: Beginning of the End

In May 2022, the cracks began to show. The collapse of a major cryptocurrency project led to the evaporation of a $500 million investment. This was just the beginning of a catastrophic chain of events.

The subsequent crash in Bitcoin and other crypto assets completely shattered the fund's leveraged strategy. Imagine borrowing $1 billion against $2 billion in crypto assets, only to see those assets halve in value. The debt suddenly becomes an insurmountable obstacle, with bankruptcy as the only exit.

Bankruptcy and Escape

The fund's collapse left a $3.5 billion debt hole, causing several crypto companies to go bankrupt and leaving countless investors in turmoil. Meanwhile, Zhu disappeared, seemingly vanishing into thin air.

Instead of facing the consequences, Zhu fled to a luxurious lifestyle abroad. However, his escape was short-lived. In September 2023, he was arrested at an airport while attempting to flee using a fake passport.

From Crypto King to Inmate

Now, instead of ruling a crypto empire, Zhu finds himself in custody, facing up to 10 years in prison. His $50 million mansion has been seized, his once-valuable NFTs are worthless, and his reputation lies in ruins.

Lessons from a Crypto Catastrophe

Zhu's downfall wasn't just bad luck. It was the result of over-reliance on leverage and a lack of risk management, making everything fragile.

His rise was like building a tower of wealth with playing cards - impressive to look at but ready to collapse at any moment. True wealth isn't about how much you earn, but how much you can retain.

In the crypto market, leverage is like gravity - it can lift you high, but it can also make you fall hard. Success that comes too easily is often the biggest red flag.

As Zhu's story concludes, it serves as a stark warning to the market. The era of reckless leveraging in crypto may be over, but the lessons learned will echo for years to come.