Report: Crypto Hedge Fund Three Arrows Capital Pitched a GBTC Arbitrage Trade Before Rumored Collapse
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 thereâs been speculation about insolvency. According to a recent report, 3ACâs 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 âTerra-Luna Situation Caught Us Very Much off Guardâ â FTX CEO Sam Bankman-Fried Insists Problems Like 3AC Couldnât Have Happened With an Onchain Protocol
Before June 14, which was the last day Su Zhu tweeted, the co-founder of Three Arrows Capital Ltd. (3AC) was very active on Twitter. Since then, Zhu and 3AC co-founder Kyle Davies are not active on social media at all, but the silence has not stopped people from investigating the company. This is because various reports indicate that 3AC positions were liquidated and some reports speculate that the Terra LUNA and UST fallout crippled the company with âmassive losses.â The same account indicates that itâs possible that it caused 3AC âto use more leverage to earn it back. Also known as âRevenge trading,ââ the report added.
On June 17, it was reported by Reuters and the Wall Street Journal (WSJ) that 3AC was âexploring options, including the sale of assets and a bailout by another firm.â Davies spoke with the WSJ and he told the press that the âTerra-Luna situation caught us very much off guard.â Additionally, Michael Moro, the CEO of Genesis Trading, explained on Twitter that the firm âmitigated our lossesâ against a large counterparty that did not meet a margin call. He also added that no Genesis Trading client funds were impacted.
Then ââthe FTX CEO Sam Bankman-Fried spoke about 3AC on June 19, and he stressed that issues like 3ACâs financial meltdown âcouldnât have happened with an on-chain protocol that was transparent.â Bankman-Friedâs statement stemmed from a question that asked how the crypto industry can ensure that a 3AC moment does not happen again.
Report Says 3ACâs OTC Desk TPS Capital Pitched a GBTC-Linked Trade Before the Alleged Collapse
Additionally, The Block reporter Frank Chaparro published a report that said âdays before Three Arrows Capital blew up it was pitching investors on a new arbitrage trade.â 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). âThey pitched to so many people,â an individual familiar with the matter told Chaparro.
âThree Arrowsâ 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,â Chaparro wrote. âGBTC currently trades at a 33.75% discount to the price of Bitcoin, which it is meant to track.â 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 âprocess will take time.â
What do you think about the 3AC situation and the firmâs alleged GBTC arbitrage opportunity? Let us know what you think about this subject in the comments section below.