How a $3 Billion Crypto Fortune Evaporated: The Su Zhu Case Study in Leverage Gone Wrong

When the cryptocurrency market crashed in 2022, few stories captured the industry’s attention quite like the collapse of Three Arrows Capital (3AC) and its co-founder Su Zhu. What unfolded wasn’t just a financial failure—it was a masterclass in how excessive leverage and unchecked risk-taking can dismantle even the most seemingly invincible trading operations.

The Rise of an Ambitious Operator

Su Zhu didn’t start as a cryptocurrency heavyweight. In 2012, he was simply another trader working at Deutsche Bank, handling markets with competence but hardly distinction. His Singapore roots and entrepreneurial hunger, however, set him apart. By the time he co-founded Three Arrows Capital, Su Zhu had cultivated a reputation as a bold market player willing to make outsized bets when others hesitated.

The early 2020s were kind to him. As Bitcoin and Ethereum surged, 3AC’s portfolio swelled to billions. Su Zhu became a fixture on social media, confidently predicting a “super cycle” in cryptocurrency prices while simultaneously spending millions on high-profile NFT purchases. His lifestyle—mansions in multiple countries, luxury assets, enviable access to the industry’s inner circles—projected the image of unstoppable wealth. Investors, both retail and institutional, wanted a piece of what he was building.

The House of Cards: How Leverage Built an Empire on Air

The secret to Su Zhu’s rapid ascent reveals itself upon closer inspection: Three Arrows Capital operated as a perpetual borrowing machine. The firm accessed credit lines from nearly every major player in crypto lending—BlockFi, Voyager, Genesis, and others. But here’s where the strategy becomes precarious: much of the borrowed capital was funneled into purchasing more leveraged positions rather than actual productive ventures.

Think of it this way: Su Zhu took $2 billion in cryptocurrency assets and used them as collateral to borrow $1 billion in fresh capital. That $1 billion was then used to take more leveraged positions, which theoretically generated more collateral for additional borrowing. This recursive borrowing chain worked brilliantly as long as asset prices climbed. But it created a catastrophic vulnerability—if the underlying assets declined, the entire structure would implode.

The trust 3AC accumulated across the industry masked the underlying fragility. Wealthy crypto investors, senior fund managers, and other hedge funds all believed their capital was safe in Su Zhu’s hands. What they didn’t realize was that their money was essentially part of a highly leveraged speculation machine with minimal safety buffers.

May 2022: When LUNA Changed Everything

The first major signal arrived in May 2022 when LUNA, a prominent cryptocurrency project, experienced a catastrophic price collapse. Three Arrows Capital had amassed approximately $500 million in LUNA holdings. Within days, that investment became nearly worthless.

Most observers initially dismissed this as a contained incident—a single bad bet in an otherwise robust portfolio. They were wrong. LUNA’s implosion wasn’t an isolated event but rather the first domino to fall. When Bitcoin, Ethereum, and the broader cryptocurrency market entered a sharp downturn, the leverage trap that Su Zhu had constructed became inescapable.

With collateral values plummeting, 3AC found itself unable to meet margin calls. Creditors who had cheerfully extended billions in credit lines suddenly shifted into collection mode. The firm’s supposed $3 billion net worth vanished almost overnight—replaced by a staggering $3.5 billion debt gap that had no realistic recovery path.

Disappearance and the Consequences

As the crisis deepened, Su Zhu did what many desperate actors do: he vanished. Communication ceased, meetings were canceled, and the man who had commanded such attention in crypto circles seemed to have simply evaporated. Meanwhile, the damage rippled outward. BlockFi, Voyager, Genesis, and other lenders faced their own insolvency crises. Retail investors who had trusted these platforms to safeguard their holdings suffered devastating losses. Thousands of people discovered that their life savings had been decimated by cascading defaults in the crypto lending ecosystem.

For months, Su Zhu’s whereabouts remained unclear. Then, in September 2023, Singapore authorities apprehended him at Changi Airport as he attempted to flee the country using a fraudulent passport. The man who once embodied the pinnacle of crypto success now faced prosecution, potential imprisonment of up to a decade, and forfeiture of seized assets—including a $50 million property and once-valuable NFT collections.

Beyond Personal Failure: A Systemic Warning

Su Zhu’s downfall carries lessons that extend far beyond his individual story. His trajectory reveals how leverage—when deployed without adequate risk management frameworks—amplifies both gains and losses exponentially. The early success created a dangerous feedback loop: positive returns bred confidence, confidence bred bigger bets, and bigger bets required more leverage.

The crucial mistake wasn’t borrowing itself; leverage is a legitimate financial tool. Rather, it was the casual disregard for what could go wrong. Su Zhu operated as though favorable market conditions were permanent, that LUNA would never collapse, that Bitcoin would never decline sharply, that creditors would perpetually remain patient. This isn’t speculation grounded in rigorous analysis—it’s gambling dressed in the language of institutional trading.

Real wealth isn’t measured by peak portfolio values but by the durability of those assets under stress. Su Zhu accumulated billions on paper while building almost no genuine resilience into his operations. When stress arrived—as it always does in financial markets—the entire edifice crumbled within weeks.

The Takeaway for Crypto Participants

The Su Zhu saga should serve as a permanent reminder: in cryptocurrency markets, excessive leverage is gravity in reverse. It lets you fly higher than should be possible, but the eventual landing is proportionally devastating. Those fortunes that appear to compound with effortless speed are often the greatest warning signs. They signal not genius but rather unsustainable risk accumulation.

The cryptocurrency industry has matured since 2022, with improved risk management practices and regulatory oversight beginning to take root. Yet the temptation to over-leverage remains ever-present, particularly during bull markets when greed overwhelms caution. Su Zhu’s imprisonment serves as a stark reminder: some costs of financial recklessness can never be recovered, regardless of future market performance.