2 Former Credit Suisse Traders Are Wall Street’s Newest Crypto Billionaires

JPM CEO Jamie Dimon has softened his stance on bitcoin as his firm works to build its own crypto business, but in hindsight, it’s becoming increasingly clear why he initially opposed crypto and threatened to fire any bankers caught dabbling in it. Years later, the crypto boom has enabled an entire cohort of Wall Street bankers to walk off the job.

The other day, there were reports about a Goldman Sachs MD who decided to retire after raking in millions of dollars with dogecoin. Now, Bloomberg is reporting that two former Credit Suisse traders (and longtime friends) have struck it rich with Three Arrows Capital, their own private crypto investment firm that is worth billions of dollars.

While their former CS colleagues (whose friendship dates back to high school) are being scapegoated for the Greensill implosion and Archegos blowup, twin scandals that cost the bank billions of francs, Kyle Davies and Su Zhu, now 34, have earned their own massive pile of “f*ck you” money, all thanks to crypto, Bloomberg said.

Davies and Zhu attended high school together, then studied at Columbia University in New York before joining Credit Suisse as derivatives traders in Tokyo. After three years at the Swiss bank, they quit and launched Three Arrows Capital to begin trading traditional currencies in emerging markets.

“It was a very inefficient market, and that’s where we got our start,” Davies said.

Within three years, they went from working in their San Francisco apartment to hiring about 35 people and trading 5% to 10% of all local emerging market currency volumes, he said.

They diversified into options, equities and crypto after “bigger and better firms came in and were better than us” in FX emerging-markets trading, Davies said. By 2018, the firm concentrated exclusively on crypto.

Their Singapore-based company now runs a fund, DeFiance Capital, that invests in decentralized finance, betting that these businesses will “eat traditional finance over the next decade,” according to the group’s website. Investments include InsurAce, which provides insurance services, and CDEX, a cryptocurrency swap platform.

Of course, they’re not the only Wall Street veterans who defected to embrace crypto. The number of former Wall Street titans turned crypto devotees has grown considerably: there’s Dan Morehead of Pantera Capital and Mike Novogratz of Galaxy Digital.And of course Aziz McMahon, the Goldman MD we mentioned earlier.

Recent filings showed Three Arrows owned 5.6% of Grayscale Bitcoin Trust, one of the earliest funds to allow traders to gain exposure to bitcoin via their brokerage accounts. That stake alone would have made them billionaires, though its valuation has fallen considerably in recent weeks.

Kyle Davies and Su Zhu

The Grayscale stake made Three Arrows the largest shareholder and would have been worth as much as $2.1 billion in April. The trust’s shares have since tumbled 43% following Musk’s announcement this month that Tesla would suspend accepting the digital currency for purchases of its electric cars because of “rapidly increasing use of fossil fuels for Bitcoin mining” and regulatory clampdowns from China.

On a side note, Zhu has offered a word of caution to their fellow crypto billionaires: don’t talk about your crypto wealth. It can only cause problems.

Definitely, would esp urge crypto billionaires to turn down forbes list ranking questionnaires / interviews

No point getting involved, just say “no comment” like I do https://t.co/3ddhRc30lX

— Zhu Su (@zhusu) January 25, 2021

Asked about where he sees long-term value in crypto right now, Davies said ethereum seems like a solid play. “We have been long crypto for a while,” Davies said. “We’ve not always been long Ethereum, in fact we’ve been short for periods of time, too. What’s the best way to beat Bitcoin right now? Well it’s just to own Ethereum. The ultimate goal of my book is to outperform Bitcoin.”