3AC founders refuse to comply with subpoena, launch bankruptcy claims trading exchange instead.
Zhu Su and Kyle Davies, founders of the now-bankrupt Three Arrows Capital (3AC) launch Open Exchange — a platform for trading in a $20 billion market of claims against bankrupt crypto firms, including 3AC.
Claims against bankrupt firms are obligations or debt owed by a company that has filed for bankruptcy. 3AC was the first in what would be an avalanche of centralized crypto firm bankruptcies. Its fall was the result of Luna and TerraUSD’s collapse in May 2022.
Now, 3AC’s founders are trying to turn their failure into a source of profit.
Claims against bankrupt firms can be traded on the secondary market as a type of distressed debt. This allows investors to purchase claims for a fraction of the face value, in the hope that the company will eventually pay back the debt in full or a portion of it through its bankruptcy proceedings. The value of these claims is based on the likelihood of the company being able to repay its debts, as well as the timing and amount of the payments.
To trade claims against bankrupt firms, investors typically work with a broker who specializes in distressed debt. The broker can assist with identifying potential claims to purchase, determining their value, and facilitating the transaction.
Open Exchange promises to monetize claims by providing a marketplace for their trading. Now, claimants may have an unusual resolution to money lost to 3AC and its fellow bankrupt companies, including FTX, Voyager Digital, Celsius Network, Genesis, BlockFi, et al.
Vital to note that investing in claims against bankrupt firms is a high-risk investment and is not suitable for all investors. The outcome of bankruptcy proceedings can be uncertain, and there is no guarantee that the company will be able to repay its debts in full or at all. As such, it is important for investors to thoroughly research and understand the risks involved before making an investment in this type of asset.