Last week there was a lot of focus on the Three Arrows Capital (3AC) cryptocurrency hedge fund, as the company allegedly held a large number of liquidated leveraged positions and there was speculation about insolvency. According to a recent report, 3AC’s over-the-counter (OTC) operation, TPS Capital, presented an opportunity for GBTC arbitrage before the company was unable to respond to margin calls.
3AC co-founder says “Earth-Moon situation has taken us by surprise” – FTX CEO Sam Bankman-Fried insists problems like 3AC could not happen with an Onchain protocol
Before June 14, that was the last day Su Zhu he tweeted, the co-founder of Three Arrows Capital Ltd. (3AC) has been very active on Twitter. Since then, Zhu and 3AC co-founder Kyle Davies have not been active on social media at all, but silence has not stopped people from investigating the company. This is because several reports indicate that 3AC posts and some have been liquidated reports they speculate that the consequences of Terra LUNA and UST have paralyzed the company with “massive losses”. The same account indicates that it may have caused 3AC to use more leverage to recover. Also known as “revenge trading,” the report adds.
On June 17, Reuters and the Wall Street Journal (WSJ) reported that 3AC was “exploring options, including the sale of assets and a bailout by another company.” Davies spoke to the WSJ and told reporters that the “Earth-Moon situation caught us off guard.” In addition, Michael Moro, CEO of Genesis Trading, he explained on Twitter that the firm “mitigated our losses” against a large counterparty that failed to comply with a margin call. He also added that the funds of Genesis Trading customers were not affected.
Then FTX CEO Sam Bankman-Fried he spoke on 3AC on June 19, and stressed that problems such as the financial collapse of 3AC “could not occur with a protocol in the chain that was transparent.” Bankman-Fried’s statement came from a question who asked how the crypto industry can ensure that a 3AC moment does not happen again.
Report says 3AC OPS Desk TPS Capital launched GBTC-linked trade ahead of alleged collapse
Also, The Block reporter Frank Chaparro published a report stating that “days before Three Arrows Capital exploded, it was launching a new arbitrage trade for investors.” Chaparro detailed that The Block reviewed investment documents that were allegedly presented to investors by TPS Capital and that the arbitrage opportunity involved GBTC, the gray-linked traded product linked to bitcoin (BTC). “They threw so many people,” a person familiar with the matter told Chaparro.
“Three Arrows’ argument was to structure an exchange for counterparties that would offer the collapse of the discount as the deadline for the SEC’s decision approached,” Chaparro wrote. “GBTC is currently trading at a 33.75% discount on the price of Bitcoin, which it is intended to track.” Like the Celsius situation, the public had no news of anyone linked to 3AC. Although, the Celsius Network team posted a blog post stating that “the process will take time.”
What do you think about 3AC’s situation and the company’s alleged GBTC arbitrage opportunity? Let us know what you think about this topic in the comments section below.
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