Last week there was a lot of focus on the crypto hedge fund Three Arrows Capital (3AC) as the firm allegedly had a great deal of leveraged positions liquidated and there’s been speculation about insolvency. According to a recent report, 3AC’s over-the-counter (OTC) operation TPS Capital pitched a GBTC arbitrage opportunity before the company reportedly failed to meet margin calls.
3AC Co-Founder Says ‘Terra-Luna Situation Caught Us Very Much off Guard’ — FTX CEO Sam Bankman-Fried Insists Problems Like 3AC Couldn’t Have Happened With an Onchain Protocol
Prior to June 14, the last day of Su Zhu tweetedThree Arrows Capital Ltd. co-founder Kyle Davies was active on Twitter. Zhu, along with Kyle Davies, the co-founder of 3AC, have not been active on social media since then. However, this has not prevented people from looking into the company. This could be due to various reports indicating that 3AC positions had been eliminated and others. reports speculate that the Terra LUNA and UST fallout crippled the company with “massive losses.” The same account indicates that it’s possible that it caused 3AC “to use more leverage to earn it back. Also known as ‘Revenge trading,’” the report added.
On June 17, it was reported by Reuters and the Wall Street Journal (WSJ) that 3AC was “exploring options, including the sale of assets and a bailout by another firm.” Davies spoke with the WSJ and he told the press that the “Terra-Luna situation caught us very much off guard.” Additionally, Michael Moro, the CEO of Genesis Trading, explained on Twitter that the firm “mitigated our losses” against a large counterparty that did not meet a margin call. He added that Genesis Trading clients funds weren’t affected.
Then the FTX CEO Sam Bankman-Fried spoke about 3AC on June 19, and he stressed that issues like 3AC’s financial meltdown “couldn’t have happened with an on-chain protocol that was transparent.” Bankman-Fried’s statement stemmed from a questionThat question asked what the crypto industry could do to ensure that such a moment doesn’t happen again.
Report Says 3AC’s OTC Desk TPS Capital Pitched a GBTC-Linked Trade Before the Alleged Collapse
The Block reporter is also available Frank Chaparro published a report that said “days before Three Arrows Capital blew up it was pitching investors on a new arbitrage trade.” Chaparro detailed that The Block reviewed investment documents that were allegedly pitched to investors by TPS Capital and the arbitrage opportunity involved GBTC, the Grayscale exchange-traded product tied to bitcoin (BTC). “They pitched to so many people,” an individual familiar with the matter told Chaparro.
“Three Arrows’ pitch was to structure a trade for counterparties that would offer the upside of the discount collapsing as the deadline neared for the SEC decision,” Chaparro wrote. “GBTC currently trades at a 33.75% discount to the price of Bitcoin, which it is meant to track.” Similar to the Celsius situation, the public has not really heard from anyone tied to 3AC. Although, the Celsius Network team did publish a blog post that noted the “process will take time.”
What do you think about the 3AC situation and the firm’s alleged GBTC arbitrage opportunity? Comment below and let us know how you feel about the subject.
Image creditShutterstock. Pixabay. Wiki Commons
DisclaimerThis information is provided for educational purposes only. This article is not intended to be a solicitation or offer to sell or buy any product, service, or company. Bitcoin.com doesn’t offer investment, tax or legal advice. The author and the company are not responsible for any loss or damage caused or alleged caused by the content or use of any goods, services, or information mentioned in the article.
