Cryptocurrency hedge fund Three Arrows Capital (3AC) received a lot of attention last week as the firm allegedly liquidated a large number of leveraged positions and there were rumors of insolvency. According to a recent report, a 3AC over-the-counter (OTC) operation, TPS Capital, introduced GBTC arbitrage opportunity before the company reportedly failed to meet margin calls.
3AC co-founder says “Terra-Luna situation took us by surprise” – FTX CEO Sam Bankman-Fried insists problems like 3AC could not have arisen with the Onchain protocol
Until June 14, the last day of Su Zhu. tweetedco-founder Three Arrows Capital Ltd. (3AC) has been very active on Twitter. Since then, Zhu and 3AC co-founder Kyle Davis have not been active on social media at all, but the silence hasn’t stopped people from investigating the company. This is because different reports indicate that 3AC positions have been liquidated and some reports suggest that the effects of Terra LUNA and UST inflicted “enormous losses” on the company. The same account stated that this may have caused 3AC to “use more leverage to get it back. Also known as “vengeance trading,” the report says.
This was reported on June 17 Reuters and Wall Street Journal (WSJ) that 3AC is “exploring options, including selling assets and bailing out another firm.” Davis spoke to the WSJ and told the press that “the Terra-Luna situation took us by surprise.” In addition, Michael Moreau, CEO of Genesis Trading, explained on Twitter that the firm “cut our losses” on a large counterparty that failed to meet a margin call. He also added that Genesis Trading customer funds were not affected.
Then FTX CEO Sam Bankman-Fried spoke about 3AC on June 19, and he stressed that issues like the financial collapse of 3AC “couldn’t happen with a transparent on-chain protocol.” The Bankman-Fried statement was made from question who asked how the crypto industry can ensure that the 3AC moment does not happen again.
Report Says 3AC OTC Service TPS Capital Carried Out GBTC-Related Deal Prior To Alleged Crash
In addition, The Block reporter Frank Chaparro published report it stated that “in the days leading up to the crash, Three Arrows Capital offered investors a new arbitrage deal.” Chaparro detailed that The Block reviewed investment documents that were allegedly presented to TPS Capital investors, and the arbitrage opportunity involved GBTC, a grayscale exchange-traded product pegged to bitcoin (BTC). “They reached out to so many people,” said Chaparro, a person familiar with the matter.
“Three Arrows’ challenge was to structure a deal for counterparties that would offer an advantage if the discount falls as the SEC decision deadline approaches,” Chaparro wrote. “GBTC is currently trading at a 33.75% discount to the Bitcoin price it is supposed to track.” As with Celsius, the public has heard nothing from anyone associated with 3AC. Although the Celsius Network team did publish Blog post who noted that “the process will take time”.
What do you think of the 3AC situation and the alleged GBTC arbitrage opportunity? Let us know what you think about it in the comments section below.
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