Report: Crypto Hedge Fund Three Arrows Capital Pitched a GBTC Arbitrage Trade Before Rumored Collapse

Last week, crypto hedge fund Three Arrows Capital (3AC) received Much attention was focused on the company. According to recent reports, 3AC’s over-the-counter (OTC) operation TPS Capital sold a GBTC arbitrage opportunity before the company reportedly could not meet its margin call.

3AC Co-Founder Says “Terra-Luna Situation Caught Us Very Much Off Guard” – FTX CEO Sam Bankman-Fried Claims Problems Like 3AC’s Couldn’t Happen With On-Chain Protocols

Prior to June 14, the last day Su Zhu tweeted, Three Arrows Capital Ltd. (3AC), co-founder of Three Arrows Capital, was very active on Twitter. Since then, Zhu and 3AC co-founder Kyle Davies have been completely inactive on social media, but this silence has not stopped people from investigating the company. Because according to variousreports, 3AC’s position has been liquidated and somereportsspeculate that the fall of Terra LUNA and UST has crippled the company at a “huge loss.” The same accounts indicate that it may have caused 3AC “to use more leverage to get it back. Also known as “revenge trading.”

reported on June 17 byReutersandreported byThe Wall Street Journal(WSJ) reported that 3AC is “exploring options that include selling assets or being bailed out by other firms.” Davis told the WSJ that “the Terra Luna situation caught us off guard.” Additionally, Genesis Trading CEO Michael Moroexplainedon Twitter that the company had “mitigated losses” for large clients that did not respond to the margin call. He added that Genesis Trading’s client funds were not affected.

Later, FTX CEO Sam Bankman-Fried spokeabout 3AC on June 19, stressing that problems like 3AC’s financial meltdown “could not have happened with a transparent on-chain protocol.” Bankman- Fried’s remarks stemmed from aquestionabout how the crypto industry can

ensure that the 3AC moment does not happen again.

before the alleged collapse.

Additionally, The Block reporterreportedthat Frank Chaparro“was pitching investors on a new arbitrage trade days before Three Arrows Capital blew up,” Chaparroreported that The Block confirmed the investment documents allegedly sold to investors by TPS Capital, detailing that the arbitrage opportunity involved GBTC, a grayscale listed commodity related to bitcoin (BTC). They sold to so many people,” an individual familiar with the matter told Chaparro.

“The Three Arrows’ sales pitch was to structure a deal for counterparties that would provide the upside that the discount would collapse as the deadline for the SEC’s decision approached,” Chaparro wrote.” GBTC is currently trading at a 33.75% discount to the price of bitcoin, meaning tracking.” As with the Celsius situation, the public has not really heard from anyone associated with 3AC. However, the Celsius Network team did publish ablog postnoting that “the process takes time.”

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