Founders of the now-defunct crypto hedge fund Three Arrows Capital (3AC) are seeking to raise $25 million from investors to start a new crypto exchange called GTX.
Kyle Davies and Su Zhu are listed as founding members in a pitch deck obtained for a distressed debt marketplace called GTX. Davies and Zhu founded Three Arrows Capital, a once $10 billion Singapore-based hedge fund that filed for bankruptcy in July. The fund, also known as 3AC, was ordered to liquidate by a British Virgin Islands court after a plunge in prices and risky trades left it unable to repay lenders.
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The new investor pitch comes as the Three Arrows founders navigate their own controversial bankruptcy. Advisors working to liquidate 3AC have accused Davies and Zhu of not cooperating with the liquidation process. The advisors served the co-founders a subpoena over Twitter last week, claiming that their whereabouts were still unknown. The Block first reported the 3AC founders’ plans for a new exchange. Davies said in November that he was in Bali and refuted claims that he and his co-founder were not cooperating.
The new marketplace looks to appeal to the more than one million FTX depositors that are now involved in a bankruptcy proceeding, a slide in the pitch deck said. Many of those FTX clients are selling claims at about one-tenth of their value for immediate liquidity as they try to avoid what could be a years-long wait for repayment, according to the deck.
They cited a “clear need to unlock” the claims market, one they value at $20 billion and believe GTX could “dominate” within two or three months. GTX said in its pitch that, once scaled, the platform could fill a “power vacuum left by FTX” within crypto trading and move into the securities lending market.
GTX is raising a $25 million seed for the platform, with a goal of coming to the market by the end of February at the latest, according to the deck. Mark Lamb and Sudhu Arumugam, co-founders of crypto trading platform CoinFLEX, are listed alongside Davies and Zhu as founding members. Representatives from CoinFLEX did not respond immediately to CNBC’s request for comment.
Both Zhu and Davies alleged that their long positions were hunted by Alameda Research. The pair also claimed that Sam Bankman-Fried’s companies played a role in 3AC’s collapse, although the disgraced FTX Founder denied the allegations. Several watchdogs including the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) started investigating 3AC and its founders for financial malpractice and defrauding investors
