Investing

3AC Founders to Launch Crypto Bankruptcy Claims Exchange: Report

Tim Fries

Published: January 17, 2023 10:25 pm

3AC founders Su Zhu and Kyle Davies are holding negotiations to secure $25 million in funding to launch a new crypto exchange, GTX, the Block reported on Monday. Zhu and Davies are reportedly looking to launch GTX in collaboration with CoinFLEX co-founders Mark Lamb and Sudhu Arumugam.

3AC Co-Founders in Talks to Raise $25M for a New Crypto Exchange

Co-founders of the now-defunct crypto hedge fund Three Arrows Capital (3AC) are in talks to raise $25 million in funding to launch a new crypto exchange named GTX, according to the Block. The pair, Su Zhu and Kyle Davies, are working on launching the new venture in partnership with Mark Lamb and Sudhu Arumugam, co-founders of the crypto futures exchange CoinFLEX.

The move comes as a surprise given that Zhu and Davies went missing after the 3AC’s bankruptcy last year. The hedge fund, which once had $10 billion in assets under management, went bankrupt last year in the wake of the LUNA crash in May 2022 due to the broader crypto market downturn.

However, 3AC did not go bust purely due to outside factors. The hedge fund made poor decisions, including directional trades in Grayscale Bitcoin Trust, Luna Classic (LUNC), and Staked Ether (stETH). It also borrowed funds from more than 20 major institutions, exposing it significantly to the subsequent crypto crash.

Zhu and Davies Reappear After Going Missing in the Wake of 3AC Collapse

Following the 3AC’s fall, Zhu and Davies disappeared from the crypto scene, maintaining minimal contact with Teneo, a consulting firm selling 3AC’s assets. Teneo executive Russel Crumpler previously said his communication with the two co-founders has been practically non-existent.

The collapse caused a chain reaction that resulted in an unprecedented slump in crypto prices, including Ether, leading to multiple liquidations for the hedge fund. These developments also drove other crypto projects into bankruptcy, including the crypto brokerage Voyager Digital which filed for Chapter 11 protection after 3AC could not pay back the $670 million it had borrowed from the company. Other crypto firms were also affected, including Genesis, BlockFi, BitMEX, and FTX, which collapsed in November due to other reasons.

In October, the US Securities and Exchange Commission (SEC) and CFTC joined forces to launch a probe into 3AC, investigating several possible violations by the hedge fund. The watchdogs are allegedly probing whether 3AC misled investors on the stability and health of its balance sheet, as well as whether the firm appropriately registered with government agencies.

This article originally appeared on The Tokenist