In an audacious, and some might say perverse venture, the co-founders of Three Arrows Capital have launched an exchange to trade bankruptcy claims, including those for their own firm.
Indeed, the logo for 3AC, as well as FTX, are featured on the website for Open Exchange, the newly minted platform set up by Kyle Davies and Su Zhu. “Do you have money stuck on a crypto platform?” reads the company’s slogan.
One of those is 3AC, the pair’s failed $10B hedge fund, which collapsed and entered liquidation last July after suffering catastrophic losses from toxic debts and worthless positions in Terra.
‘Everyone They Hurt’
The exchange will allow claims on bankrupt ventures like Celsius, Voyager, BlockFi and more, in a grim reminder of all the projects which fell apart in 2022.
ZachXBT, crypto’s most well-known whistleblower and researcher, was unequivocal when The Defiant asked him what he thought of Open Exchange.
“It’s an insult to everyone they hurt as they continuously play victim and evade responsibility in contrary to what Su and Kyle have claimed,” he said.
While it may be surprising to see buyers and sellers in distressed failures, there has long been a thriving marketplace in bankruptcy claims in TradFi. The idea is that creditors or investors in Three Arrows and its ilk can sell their claims at a deep discount and recompense a portion of their losses, while buyers hope to eventually cash in the claims at a later date for a profit.
The key, of course, is time — it can take years for bankruptcies to wind their way through the courts. And in the case of Three Arrows, the liquidation is taking place in the British Virgin Islands rather than the more predictable jurisdiction of U.S. federal courts.
Then again, traders can always flip claims long before the bankruptcies are resolved.
On Thursday, Decrypt reported on a pitch deck with similar branding to OpenExchange but featuring the name “GTX.” It shows a founding team of Davis, Zhu, and also Mark Lamb and Sudhu Arumugam, who are co-founders of CoinFlex, another exchange.
On Twitter, Zhu announced that CoinFlex’s FLEX token will be Open’s token — the coin is down about 10%, but has absurdly jumped nearly 20-fold in price in the past 30 days.
Open’s announcement was met with derision in the crypto space. The 3AC founders have not been cooperative during the liquidation procedure, according to Teneo, which is handling the liquidation. Singaporean authorities are also investigating 3AC.
Despite the ill-will towards Davies and Zhu, the 3AC co-founders raised $25M for Open, according to the associated pitch deck.
ZachXBT told The Defiant he’s trying to find out who Open’s investors are. “Sadly there are people in this space who will fund almost anything,” he added.