The Crypto Geniuses Who Vaporized a Trillion Dollars
It was there that Zhu learned the art of arbitrage — attempting to capture small variations in relative value between two linked assets, typically selling the one that’s overpriced and buying the one that’s underpriced. He focused on exchange-traded funds (basically mutual funds that are listed like stocks), trading in and out of related ones to collect small profits. He excelled at it, rising to the top percentile of moneymakers at Flow. The success gave him a new confidence. He was known to bluntly criticize colleagues’ performance and even call out his bosses. Zhu stood out in another way: The Flow offices, full of servers, ran hot, and he would come to work in short-shorts and a T-shirt, then remove the shirt, leaving it off even when he went through the building’s lobby. “Su would be walking around topless in his mini-shorts,” a former colleague recalls. “He was the only one who’d take off his shirt and trade.”
After Flow, Zhu did a stint at Deutsche Bank, following in the footsteps of Arthur Hayes, the crypto legend and billionaire co-founder of the BitMEX exchange. Davies had stayed on at Credit Suisse, but by then both were tiring of the big-bank life. Zhu complained to acquaintances about the low caliber of his banking colleagues and a bloated culture that allowed people to lose the firm’s money on a trade with little consequence; in his view, the best talent had already decamped for hedge funds or struck out on their own. He and Davies, now 24 years old, decided to start their own shop. “There was very little downside to leaving,” Davies explained in the interview last year. “Like, if we ever left and really messed it up hard, we would definitely get another job.”
In 2012, while both were temporarily living in San Francisco, Zhu and Davies pooled their savings and borrowed money from their parents to scrape together about $1 million in seed funds for Three Arrows Capital. The name came from a Japanese legend in which a distinguished daimyo, or warlord, teaches his sons the difference between trying to snap a single arrow — effortless — and trying to break three arrows together — impossible.
In less than two months, they had doubled their money, Davies said on the podcast UpOnly. The pair soon headed for Singapore, which has no capital-gains tax, and by 2013, they’d registered the fund there with plans to relinquish their U.S. passports and become citizens. Zhu, fluent in Chinese and English, moved fluidly in the Singapore social scene, occasionally hosting poker games with Davies and friendly exhibition chess matches. They seemed frustrated by their inability to get Three Arrows to the next level, though. At a dinner around 2015, Davies lamented to another trader about how hard it was to raise money from investors. The trader wasn’t surprised — after all, Zhu and Davies had neither much of a pedigree nor a track record.