Not long after his cryptocurrency hedge fund collapsed last year, spawning a market meltdown that devastated the industry, Kyle Davies got on a plane and left his troubles behind.

He flew to Bali. As his company was liquidated and law enforcement authorities opened investigations on two continents, Mr. Davies spent his days painting in cafes and reading Hemingway on the beach.

He also went sightseeing. He traveled in Thailand, where the fried oysters cost only a few dollars, and admired the local architecture in Malaysia. He posted a photo from a private zoo in Dubai, showing him stroking a tiger chained to a pole. In Bahrain, he attended a Formula 1 event in the run-up to the Grand Prix.

One clear evening, on a rooftop in Bali, Mr. Davies took shrooms with a group of crypto colleagues. “You look at the stars, and the stars are just, like, moving,” he recalled over dinner last month at a seafood restaurant in Barcelona, Spain, where he was vacationing with his wife and two young daughters. “You touch the grass, and it feels, like, not like normal grass.”

Life as a crypto industry pariah, it turned out, wasn’t so bad.

A year ago, Three Arrows Capital, the hedge fund founded by Mr. Davies and Su Zhu, both now 36, imploded almost overnight. Worshiped by their hundreds of thousands of Twitter followers, Mr. Davies and Mr. Zhu had been crypto superstars, known for their trading acumen and bold predictions about the market. They were fixtures on the crypto podcast circuit whose influence allowed them to borrow hundreds of millions of dollars from leading firms and make big bets on the future of the industry.

When their hedge fund failed, a large swath of the industry was dragged down with it. The ensuing crisis drained the savings of millions of amateur investors and plunged other companies into bankruptcy.

But by their own account, Mr. Davies and Mr. Zhu have been thriving. They left Singapore, where Three Arrows was based, and traveled around Asia, effectively taking the summer off. Mr. Davies started meditating. Mr. Zhu played video games and found a surf instructor. His old crypto associates were bad-mouthing him in the press, but he made new friends, a mix of surfer types and UFC fighters.

“They had a lot of empathy and sympathy for me,” Mr. Zhu said from his luxury home in Singapore. “They get defeated in a big fight, lose sponsorships or whatever, and everyone’s crying. But then the fighter himself — his mind has already passed to the next fight.”

Yet many other top executives who gained wealth and status by marketing crypto to the masses have avoided serious repercussions. They had cashed out early, invested in real estate or holed up in tax havens.

The Three Arrows founders are two of the most prominent examples. They are still living comfortably, after managing a fund that oversaw more than $4 billion at its peak. Mr. Davies and Mr. Zhu declined to provide an estimate of their total wealth, but said they had saved enough over the years that they didn’t need to work again.

Neither was willing to apologize for the collapse. Three Arrows owes its creditors $3.3 billion; the firm was registered in the British Virgin Islands, and its court-appointed liquidators there claim that Mr. Davies and Mr. Zhu have refused to cooperate in the recovery process. In October, Bloomberg reported that federal regulators in the United States were investigating whether Mr. Davies and Mr. Zhu had misrepresented their finances to Three Arrows investors.

Mr. Davies and Mr. Zhu maintain that they did nothing wrong. They said they had faced death threats, but pointed out that no government agency had sued them or sought their arrests.

A friend recently asked Mr. Davies whether he felt any remorse. “Remorse for what?” he said he had replied.

For the past few months, Mr. Davies and Mr. Zhu have been planning a comeback. In April, they unveiled Open Exchange, a marketplace for traders who lost money in last year’s crypto implosions. Customers will be able to buy and sell claims to the bankruptcy estates of defunct crypto firms like FTX and possibly Three Arrows itself.

In pitch documents sent to investors in January, Mr. Davies and Mr. Zhu code-named their new company “GTX,” an alphabetical successor to Mr. Bankman-Fried’s failed exchange.

“I just thought it was very funny,” Mr. Zhu said.

A crypto ‘supercycle’

Mr. Davies and Mr. Zhu have lived parallel lives. They grew up in the northeastern United States and went to high school together at Phillips Academy in Andover, Mass. They became business partners in the mid-2000s, while undergraduates at Columbia University. The summer after their freshman year, they traveled to Buenos Aires and set up shop in a cafe, offering to teach local workers how to play online poker and then stake them some money in return for a cut of their winnings.

But their plan to create an army of South American cardsharps had a fatal flaw: Neither of them spoke Spanish. They had wrongly assumed that working-class Argentines would understand English.

After graduating from Columbia, Mr. Davies and Mr. Zhu worked overlapping stints at Credit Suisse before founding Three Arrows in 2012 when they were in their mid-20s. They started out trading financial products tied to foreign currencies but switched to crypto around 2019, as the market was emerging from a major slump.

By 2021, as crypto prices surged to record levels, Mr. Davies and Mr. Zhu were managing billions of dollars, investing in crypto start-ups and borrowing hundreds of millions to fuel even bigger bets. Mr. Zhu amassed 500,000 followers on Twitter, promoting his theory of a crypto “super