TL;DR Breakdown
- 3AC co-founders have promised to pay creditors from their gains in the future in what they called the ‘Shadow Recovery Process’
- Controversy surrounds co-founders as the liquidation process drags on.
Description
The co-founders of Three Arrows Capital (3AC), a crypto hedge fund that collapsed in 2022, have announced their intention to donate a portion of their earnings from their latest crypto venture, Open Exchange (OPNX), to creditors who suffered losses in the fund’s collapse. Kyle Davies, one of the co-founders, expressed the belief that such a … Read more
The co-founders of Three Arrows Capital (3AC), a crypto hedge fund that collapsed in 2022, have announced their intention to donate a portion of their earnings from their latest crypto venture, Open Exchange (OPNX), to creditors who suffered losses in the fund’s collapse. Kyle Davies, one of the co-founders, expressed the belief that such a gesture would be a form of “good karma” towards the creditors.
3AC co-founders plan ‘Shadow Recovery Process’
During a Twitter Space session on July 3, Davies outlined the proposed “shadow recovery process” as an independent initiative separate from the official liquidation process being handled by consulting firm Teneo. According to Davies, this process would allow himself and his co-founder, Su, to contribute funds to 3AC creditors, but only if those creditors were early supporters of OPNX. He mentioned that several creditors have already been reimbursed while emphasizing that those who do not wish to participate in this initiative are not obliged to do so.
Davies defended their decision to embark on a new venture while their bankrupt hedge fund’s liquidation process is ongoing, stating that creditors would ultimately benefit from the new company. However, this move has sparked controversy within the crypto community, with some members criticizing the co-founders for seemingly evading their responsibilities regarding the collapse of 3AC.
Controversy surrounds co-founders as the liquidation process drags
3AC filed for Chapter 15 bankruptcy protection on July 1, 2022, with court documents later revealing a debt of $2.8 billion owed to over 20 different firms. The whereabouts of Davies and Su remains unconfirmed, as liquidators resorted to serving them with subpoenas through Twitter due to difficulties in tracking them down. A recent report by The New York Times suggested that the co-founders had been spending most of their time surfing in Bali. In a recent development, liquidators announced their intent to recover a total of $1.3 billion in lost funds from Davies personally.
The launch of OPNX on April 4 initially raised eyebrows, with concerns raised about the co-founders’ involvement in a new venture while their previous fund was undergoing liquidation. However, Davies argued that the new company would ultimately benefit the creditors. The concept of a “shadow recovery process” presented by Davies and Su is touted as the first of its kind, offering an alternative means for the co-founders to contribute to the creditors.
While the actions and intentions of the co-founders are met with mixed reactions, their commitment to donating a portion of their earnings from OPNX to their previous fund’s creditors provides a unique approach to addressing the losses suffered by investors. As the liquidation process continues and efforts to recover funds intensify, the ultimate impact and effectiveness of the “shadow recovery process” initiated by Davies and Su will become clearer.
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