LayerZero co-founder and CEO Bryan Pellegrino has accused Kyle Davies of Three Arrows Capital of trying to persuade LayerZero to transfer its entire treasury to the now-defunct crypto hedge fund shortly before its collapse.
Pellegrino made the allegation in reply to an X post on Thursday, claiming that Davies promised the interoperability protocol LayerZero “better rates than other borrowers” in a “last gasp effort” before the collapse.
The LayerZero chief said, “Getting liquidated is one thing. Lying and exploiting your friends, portcos, and people around you is another.”
In an episode of the Unchained Podcast, Davies refused to apologize to investors for billions lost in 3AC’s bankruptcy and the collapse of 3AC and remained adamant that his professional reputation was still intact despite receiving outsized backlash for his past misdeeds on social media.
Davies wrote on X: “We were traders who devoutly believed in up only forever. Still do. Lenders chose to gamble their own low-risk client’s funds on a high-risk thesis.”
However, Pellegrino criticized Davies for misleading and taking advantage of associates and partners. Pellegrino further asserted that 3AC was financially unstable when proposing the arrangement to LayerZero.
Davies had not responded to Pellegrino’s posts on X at the time of publication.
Related: 3AC’s creditors must file dividend claims by March, says Teneo
Following the collapse of Terra in May 2022, 3AC, a notable hedge fund manager in the crypto industry with assets exceeding $3 billion, filed for Chapter 15 bankruptcy in July of the same year due to liquidity challenges.
Davies and Su Zhu, the co-founders of 3AC, subsequently launched Open Exchange (OPNX), a platform for crypto derivatives and claims trading, in April 2023. However, the platform ceased operations earlier this year, in February.
On Jan. 5, 2023, Davies and Zhu were subpoenaed via X because they avoided communication with the relevant authorities and “did not yield satisfactory cooperation” with liquidators.
Zhu was arrested in Singapore last September and was jailed until December for non-cooperation in 3AC’s liquidation inquiries. Davies, however, avoided apprehension.
In a recent podcast, Davies said he stayed clear of Singapore to evade potential imprisonment.
On Dec. 21, a British Virgin Islands court froze $1.14 billion worth of Davies and Zhu’s assets. 3AC liquidator Teneo is seeking to recover $1.3 billion directly from Zhu and Davies, claiming they took on significant leverage with investor funds after 3AC became insolvent.