LayerZero co-founder and CEO Bryan Pellegrino has accused Kyle Davies, co-founder of Three Arrows Capital (3AC), of persuading LayerZero shortly before its collapse to transfer all its funds to a now-defunct crypto hedge fund. Pellegrino made these allegations in response to a post on X, claiming that Davies promised LayerZero better rates than other borrowers just before the collapse.
Expressing his frustration, Pellegrino stated, "It's one thing to be liquidated. It's another thing to lie and take advantage of your friends, the port company and the people around you." He criticized Davies for misleading colleagues and partners, emphasizing the unethical nature of such actions.
In an episode of the Unchained Podcast, Davies declined to apologize to investors for the significant losses caused by the bankruptcy and collapse of 3AC, defending his professional reputation despite past controversies on social media. This stance triggered backlash, with Davies asserting on X that they were traders who fervently believed in perpetual growth, and lenders willingly risked their funds based on this high-risk thesis.
However, Pellegrino rebuked Davies for allegedly deceiving and exploiting colleagues and partners, pointing out that 3AC was facing financial challenges when the arrangement was proposed to LayerZero. Following Terra's collapse in May 2022, 3AC, a prominent crypto hedge fund with over $3 billion in assets, filed for Chapter 15 bankruptcy in July of the same year due to liquidity issues.
Subsequently, Davies and Su Zhu, co-founders of 3AC, launched Open Exchange (OPNX), a crypto derivatives and debt trading platform, in April 2023. However, the platform ceased operations earlier this February.
Further complicating matters, Davies and Zhu faced scrutiny for their actions. They were summoned by X on January 5, 2023, for evading communication with authorities and failing to cooperate adequately with liquidators. While Zhu was arrested in Singapore last September and detained until December for lack of cooperation, Davies managed to avoid similar repercussions.
During a recent podcast, Davies disclosed that he avoided returning to Singapore to evade potential legal consequences. On December 21, the British Virgin Islands Court froze assets worth US$1.14 billion belonging to Davies and Zhu. Teneo, the liquidator for 3AC, is seeking to recover $1.3 billion directly from Zhu and Davies, alleging that they excessively leveraged investor funds following 3AC's collapse.
