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To “dominate” the market for crypto claims and eventually fill the “vacuum left by FTX,” the co-founders of the defunct cryptocurrency hedge fund 3AC announced they are gathering $25 million in a seed round.
Similar concerns from the community were echoed by Wintermute, a major cryptocurrency market maker, who was fast to disassociate itself from a fresh fundraising by the co-founders of failed hedge firm Three Arrows Capital (3AC).
Su Zhu and Kyle Davies, co-founders of Three Arrows Capital, joined up with Mark Lamb and Sudhu Arumugam, co-founders of the struggling cryptocurrency exchange CoinFlex, to fund $25 million for a new exchange dubbed GTX, according to a pitch deck viewed by CoinDesk.
According to GTX, it intends to establish an exchange where customers can trade equities, cryptocurrencies, and debt claims on insolvent businesses like FTX. According to the presentation, the creators believe there is a “clear market demand” to release $20 billion worth of crypto claims, which GTX said it could “dominate” in 1-2 months.
The CEO of Wintermute was one of the major voices in the crypto industry who quickly expressed their skepticism. Evgeny Gaevoy, the CEO of the market maker, tweeted on Monday, “If you are investing into coinflex/3ac ‘exchange,’ you might find it a bit more difficult to work with Wintermute in future (on the relationship building side)”
Additionally, he made it plain that his company will not invest in any initiatives, including those of the co-founders of 3AC. Gaevoy said in another tweet,
“Similarly, we are not going to be participating in venture rounds where these guys are about to enter the cap table, so founders beware.”
In essence, a crypto market maker is a trading company that uses its own funds to wager on tokens and take the opposing side of deals on exchanges when other participants attemp to enter or exit the market swiftly. Potential supporters of the new company may be discouraged from investing in it if they see that a significant market maker, like Wintermute, which transacts more than $5 billion daily, has distanced itself from GTX.
A wave of unplanned liquidations prevented the Singapore-based crypto hedge fund, known as 3AC, from being able to pay its creditors, and it went bankrupt in 2022. 3AC owed $3.5 billion in debt at the time.
The co-founders of the hedge fund mainly disappeared from view when the liquidation began, but they reappeared after the bankruptcy filing of the cryptocurrency exchange FTX in November.
By initially asking claimants in the bankruptcy proceedings that have shook the cryptocurrency market to trade their claims on GTX, the newly formed business hopes to “lead the worldwide movement towards more financial transparency, liquidity, and predictability.” According to the pitch deck, these bankruptcies include BlockFi, which had borrowed money to 3AC before going bankrupt itself, Celsius, and FTX.
If the users would also be able to exchange 3AC claims is not made clear in the presentation. Some 3AC creditors would have the opportunity to convert their claims into shares in the new claim-trading corporation, according to a Wall Street Journal story citing Zhu.
According to GTX, fees will range from 0.25 to 0.50 percent, and time to market will be “ASAP by the end of February.” The presentation deck for GTX stated that after claims trading has attracted users, it would “fill the power vacuum created by FTX” by enabling users to trade cryptocurrency and eventually equities.
The cryptocurrency community as a whole, including Nic Carter, a partner at Castle Island Ventures, a publicly traded startup fund with a blockchain emphasis, was skeptical of the new project.
“Disgraced fraudsters teaming up with other disgraced fraudsters to trade claims from a collapsed fraudulent exchange. sounds backable,” Carter said in a tweet.
