According to reports in the crypto press, Su Zhu and Kyle Davies, the founders of defunct crypto-focused hedge fund Three Arrows Capital, are teaming up with Mark Lamb and Sudhu Arumugam, the founders of cryptocurrency exchange CoinFLEX to raise funds for a new exchange called GTX.
Singapore-based Three Arrows Capital, also known as 3AC, went bankrupt in mid-2022 following the abrupt collapse of Terra’s Decentralized Finance (DeFi) ecosystem. At the time, the crypto-focused hedge fund, formerly one of the world’s largest, had a $3.5 billion hole in its balance sheet.
3AC’s founders are currently under investigation for multiple criminal and regulatory crimes relating to the abrupt collapse of the hedge fund and are believed to be in hiding in Dubai and Bali.
CoinFLEX, meanwhile, suspended withdrawals from its exchange last June amid volatile market conditions, before allowing partial withdrawals one month later. CoinFLEX has been in a restructuring process ever since. As things stand, CoinFLEX creditors are set to be handed a 65% ownership share of the cryptocurrency exchange.
GTX – An Exchange For Distressed Crypto Assets
According to a pitch deck doing the rounds, GTX is going to be an exchange for distressed cryptocurrency assets. Users of the exchange would be able to trade assets such as claims to assets being held on the likes of FTX, Celsius, BlockFi and Mt. Gox.
According to the team behind GTX, the crypto claims market is worth around $20 billion. GTX says that holders of claims to assets on exchanges such as FTX can transfer their claims to GTX and receive immediate credit in the form of a token called USDG.
Zhu, Davies, Lamb and Arumugam reportedly think the exchange could “fill the power vacuum left by FTX”, and could eventually move into regulated markets such as stocks. The 3AC/CoinFLEX founders are reportedly looking to raise $25 million to fund the exchange’s development.
CoinFLEX says it could rebrand its platform into this new entity in the future, though would seek to change the name from GTX to something else. “We will not use GTX; it currently serves as a placeholder name,” CoinFLEX said in a blog post.
Community Reacts Negatively
Crypto community members have by and large reacted negatively to the news on Twitter, mostly due to the chequered past of the 3AC founders. GTX has been derided for sounding like a play on the names of failed cryptocurrency exchanges FTX and Mt. Gox.
Su Zhu be like – “uhmm how do i mix FTX and Mt Gox together and make the ultimate scam?”
“FTX + Mt Gox = GTX
— Grinding Poet (@GrindingPoet) January 16, 2023
3AC co-founders Kyle Davies and Su Zhu @zhusu along with CoinFLEX co-founders Mark Lamb and Sudhu Arumugam are looking to raise about $25 million to launch a new crypto exchange called GTX. Scammers always scamming. Don’t fall for this garbage pic.twitter.com/geQJlyFArb
— Thyrone Cameron (@GetMeCash) January 17, 2023
One of the biggest cryptocurrency market makers Wintermute joined the throng of criticism. Wintermute’s CEO said in a Twitter thread that “we are not going to be participating in venture rounds where these guys are about to enter the cap table”, before warning investors that “if you are investing into coinflex/3ac “exchange” you might find it a bit more difficult to work with wintermute in future”.