The crypto exchange created by the founders of the now-defunct hedge fund Three Arrows Capital (3AC) is closing down just a year after its launch. In an email shared by users on the social media platform X, Open Exchange (OPNX) says it will officially cease operations and shut down in February. OPNX says users should […]
The post Crypto Exchange Launched By Three Arrows Capital Founders Abruptly Shuts Down appeared first on The Daily Hodl.
The OX token hit a price high not seen since co-founder Su Zhu was arrested in late September.
Open Exchange Token (OX), the native token of the crypto bankruptcy claims platform OPNX, spiked 50% just 20 minutes after co-founder Su Zhu supposedly posted to X (Twitter) for the first time since his arrest.
On Dec. 29, the same day he was arrested at Singapore’s Changi Airport attempting to leave the country.
gm
— 朱溯 (@zhusu) December 1, 2023
In the 20 minutes after Su’s X post, OX jumped nearly 50% to $0.021 and hit a 63-day high — a price not seen since the day of Su’s Sept. 29 arrest, according to CoinGecko data.
Shortly after the price peak, OX retraced by around 6%.
Su was arrested on Sept.
The order was meant to see Su serve four months’ imprisonment — meaning he wouldn’t be released until next year, though some have speculated he may have been released after a wallet labeled "suzhu.eth" — believed to belong to Su (though unconfirmed) — became active again on Nov.
OPNX, short for Open Exchange, is a platform allowing for the trade of creditor claims from bankrupt crypto companies.
CoinFLEX creditors claim former CEO Mark Lamb and the OPNX exchange “misappropriated” their assets in a court filing.
Some creditors of cryptocurrency futures exchange CoinFLEX are alleging that OPNX, a new crypto exchange established in part by Three Arrows Capital (3AC) co-founders Kyle Davies and Su Zhu, was created using CoinFLEX assets without their consent.
According to a writ of summons filed in the High Court of Hong Kong and seen by Cointelegraph, CoinFLEX creditors claim that OPNX co-founder and former CEO Mark Lamb is “misappropriating and/or otherwise wrongfully using the assets, human resources, intellectual properties, […] trade secrets and other technologies” of CoinFLEX by diverting them into OPNX. It alleges that Lamb performed these actions contrary to his responsibilities to CoinFLEX creditors during his tenure.
Citing the document, creditors say that Lamb devoted “time, attention, skill and/or effort” to setting up OPNX while simultaneously being employed as the CEO of CoinFLEX.
The document claims that the former CEO diverted clients and business opportunities to the rival exchange, misappropriated assets that belonged to the creditors, falsely represented that OPNX was associated with CoinFLEX creditors, divulged confidential trade secrets to third parties, solicited employees and contractors to move to OPNX, forged a fake nondisclosure agreement between himself and a third-party, and engaged in other actions that harmed the creditors.
According to a creditor who spoke with Cointelegraph, CoinFLEX’s terms of service required users to settle disputes through arbitration in Hong Kong, which is why the creditors have pursued legal action in Hong Kong instead of Seychelles, the firm’s place of domicile. The allegations have not been proven in the High Court of Hong Kong.
The plaintiffs listed in the document are two companies: Liquidity Technologies and Liquidity Technologies Software. According to Crunchbase data, the first is the Seychelles-based legal entity under which CoinFLEX originally operated. The document lists Mark Lamb, crypto investor Roger Ver, Open Technologies Holdings, and Open Technology Markets as defendants. Open Technologies holdings and markets are two companies the document claims are associated with the OPNX crypto exchange.
In January, a pitch deck for OPNX was leaked to the public and was later confirmed by the founding team as authentic. The deck listed Davies and Zhu, Mark Lamb, and Sudhu Arumugam as OPNX co-founders. In September, Zhu was arrested in Singapore’s Changi International Airport for non-compliance with a Singaporean Court Order regarding 3AC’s bankruptcy proceedings. Davies, too, was sentenced to four months in prison for contempt of court but was not within Singapore’s jurisdiction at the time of sentencing. He has since been sighted in Bali, Indonesia.
Critics, including BitMEX co-founder Arthur Hayes, Tech Crunch founder Michael Arrington, and financial and macro-financial executive Nik Bougalis, previously argued that investors shouldn’t give OPNX founders more money after they had already lost millions, if not billions, of dollars in customer assets.
However, OPNX pushed back against this criticism. When the exchange opened in April, it argued that it would allow creditors to sell their claims on the exchange for quick cash, benefiting them, and therefore was good for creditors of bankrupt firms. Kyle Davies even stated that he would donate his share of the profit to 3AC creditors.
In February, OPNX CEO Leslie Lamb, who is also the wife of OPNX co-founder and CoinFLEX CEO Mark Lamb, posted to LinkedIn, stating, “We're excited to announce that CoinFLEX will be officially rebranding to Open Exchange (OPNX).” In contrast to this statement, the Writ of Summons filed with the Court claims that OPNX is a separate exchange that CoinFLEX creditors never authorized.
In a conversation with Cointelegraph, a CoinFLEX creditor, who wished to be identified as “Kirill,” provided further details of the allegations being made by creditors. Kirill claimed he lost “a vast majority of [his] net worth” when CoinFLEX stopped processing withdrawals. According to Kirill, after withdrawals were halted, he and other creditors put together an “ad hoc creditor committee” to sort out what to do with the now-insolvent company. They also involved some of CoinFLEX’s initial investors. After months of deliberating, the committee decided to restructure the company and reopen the exchange.
Kirill stated that during this time, he became aware that Mark Lamb was talking to Davies and Zhu about investing in the new, restructured company. Kirill claims they were skeptical of involving the 3AC founders in the project. However, they claim that there was no formal way for CoinFLEX to either accept or reject them as investors since the firm was still going through a restructuring in the courts. The restructuring was approved on March 7, according to a CoinFLEX blog post.
According to Kirill, once the restructuring was approved, CoinFLEX creditors discovered that Mark Lamb was acting against the interests of creditors in the ways described in the Writ of Summons.
Related: Roger Ver denies CoinFLEX CEO’s claims he owes firm $47M USDC
After discovering these activities, the creditors filed the Writ of Summons, which Kirill claims was a required first step to obtaining an injunction against Mark Lamb to wrest control of the company away from him. They then filed for the injunction, which Kirill claims was granted by the court. The injunction allegedly states that Mark Lamb “cannot hold himself out to be a decision maker for Coinflex without express majority consent of the board.”
On October 31, the official OPNX account for X (formerly Twitter) posted a “Creditor Tender Offer” to CoinFLEX stakeholders. The offer stated that CoinFLEX creditors who accept it “will collectively receive 25% equity in OPNX, distributed in proportion to claim size.” In addition, they will each receive a portion of the exchange’s native token, OX, but these tokens will be vested for ten years. In response, Kirill claimed that this tender offer was not legally valid, stating:
“It's not legally valid. How's Mark gonna do the offer? You need the shares [to be] transferred by boards. They're not transferred by independent parties. Mark is not on the CoinFLEX board in Seychelles anymore. He doesn't have authority to transfer shares.”
Kirill also claimed that the tender offer lacks the financial information for investors to make an informed decision. In his view, this makes it unreasonable for an investor to accept the offer. “The one important piece of Mark's offer is that it's completely devoid of any information,” Kirill stated. “Any rational fiduciary would never approve an offer like this.”
Cointelegraph also obtained an order from the Supreme Court of Seychelles, which sheds some light on Roger Ver’s role in the legal dispute. According to the order, CoinFLEX has accused “a large individual customer (Roger Ver)” of defaulting on a “written manual margin agreement.” This default originally caused the exchange to be unable to process withdrawals, according to CoinFLEX’s claim as quoted by the court’s order.
Cointelegraph reached out to Roger Ver for comments. He denied that he walked away from a valid margin agreement. Instead, Ver stated that CoinFLEX made third parties aware of his trading positions, which knowledge they used to trade against him to his detriment. He claimed that CoinFLEX has agreed to an arbitration allowing him to recover the funds from these third parties.
“I was never in default and never owed CoinFLEX the $82M they initially claimed,” Ver stated. “The reality, and one that CoinFLEX has now agreed to, is that I was the one owed money the entire time, and I am the biggest victim.”
A spokesperson for OPNX declined to comment on the allegations. Since launching in April, OPNX has developed a credit currency for margin trading called “oUSD” and has obtained a Lithuania license for spot trading throughout the EU.
According to Coingecko, OPNX currently processes over $32,000 in spot trading volume and over $82 million in derivatives volume each day. Criminal and civil proceedings against OPNX co-founders Davies and Zhu remain ongoing.
Kyle Davies’ and Su Zhu’s OPNX exchange acquired a Lithuania virtual asset license to offer spot trading in the EU.
Crypto exchange OPNX has obtained a virtual asset service provider license (VASP) in Lithuania, allowing it to provide spot crypto exchange services throughout the European Union, according to a Nov. 8 announcement seen by Cointelegraph.
The announcement stated that this license would require the exchange to “adhere to the highest standards of compliance and security.” The team claims they have already implemented a “robust” Know Your Customer and Anti-Money Laundering system to ensure they comply with EU regulations.
“Securing the VASP license from Lithuanian authorities is a significant milestone in OPNX’s worldwide expansion and our mission to serve crypto users across the globe,” said OPNX CEO Leslie Lamb.
In a conversation with Cointelegraph, Lamb clarified that some OPNX services may still be unavailable in some jurisdictions within the EU. “This license gives us the ability to service the European region, but there are specific jurisdictions within the EU that do require specific licenses as well in order to operate certain services,” she stated, adding that OPNX is currently attempting to acquire those licenses. However, the current license will allow OPNX to provide spot trading services throughout the EU, with other services becoming available as further licenses are acquired.
Related: 3AC founders’ OPNX exchange claims to be funded by AppWorks, SIG
OPNX has been a controversial exchange since its inception. It was founded by Kyle Davies and Su Zhu, who also founded bankrupt crypto hedge fund Three Arrows Capital (3AC), along with Mark Lamb and Sudhu Arumugam, who founded bankrupt crypto exchange CoinFLEX. Because of its association with these prior bankruptcies, OPNX critics have claimed the exchange is unsafe to use. However, the exchange claims that it is helping bankruptcy creditors by allowing them to sell bankruptcy claims and get paid faster.
Claims can be converted into collateral to trade crypto futures on the exchange.
OPNX, an exchange dedicated to the trading of bankruptcy claims against fallen crypto firms, has listed FTX and Celsius claims.
According to the July 14 announcement, FTX claims specifically can be immediately onboarded and converted into collateral in the form of OPNX's native reborn OX (reOX) tokens or oUSD, its credit currency. Users can then trade crypto futures using reOX as collateral. The claims are tokenized in partnership with Heimdall, which also handles onboarding and user verification. Developers wrote:
"Claims will initially be converted into reOX tokens at a 100% bonus of the market price, which will converge to 0% bonus over a period of 50 weeks. This means, during Week 1, users will receive double the market price for their FTX claim."
In an illustrative example by OPNX, a $1 million FTX claim with a claim price of 30 cents on the dollar would receive $600,000 in equivalent reOX claim amounts. "In the case that a user's claim is determined to have preference, an equivalent dollar amount of the issued reOX tokens will be reclaimed from the user," the exchange wrote. Claims are transferred and stored in a separate trust.
OPNX was founded earlier this year by Kyle Davies and Zhu Su, co-founders of bankrupt Singaporean hedge fund Three Arrows Capital, also known as 3AC. On its first day of operations, OPNX saw a meager $13.64 in total volume traded. By late June, daily exchange volume had surpassed $30 million.
Cointelegraph reported in May that the U.S. Internal Revenue Service is seeking $44 billion in unpaid taxes from FTX's bankruptcy. Likewise, the U.S. Federal Trades Commission issued a $4.7 billion fine against Celsius on July 13 on a suspended judgment.
Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.
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The new “credit currency” will allow users to rely on cryptocurrencies as collateral without needing to obtain loans from other institutions.
Crypto futures exchange OPNX has launched a credit currency for margin trading, according to a July 5 statement made to Cointelegraph from the exchange’s co-founder, Mark Lamb. Called “oUSD,” the currency is available in its “phase 1” iteration, meaning that users cannot receive it without depositing crypto assets into the exchange.
In a future “phase 2” version, the platform intends to make oUSD available to users who deposit crypto into on-chain contracts to allow for possible “bankruptcy remoteness,” Lamb stated.
In the currency’s litepaper, oUSD is identified as a solution to three problems. First, lenders do not want to trust platforms to hold cash loans backed by crypto collateral. Second, exchanges and lending platforms don’t want to lend cash to margin traders, as this practice led to multiple bankruptcies during the 2022 bear market. Third, crypto derivatives traders want “portfolio margin,” or the ability to borrow and trade based on their crypto holdings rather than their stablecoin holdings.
To solve this problem, oUSD exists as a “credit currency.” It can be purchased at a 1-to-1 ratio with Tether (USDT) or used to measure profit and loss when users rely on Bitcoin (BTC), Ether (ETH) or other cryptocurrencies as collateral. Users with a negative oUSD balance must pay an interest rate determined by holders of the platform’s native token, OX. Users who have a positive balance cash out by redeeming it for USDT.
In a conversation with Cointelegraph, Lamb claimed that users would eventually be able to acquire oUSD by staking cryptocurrency within smart contracts outside the platform. This will allow them to have bankruptcy remoteness, protecting them from any possible insolvency at the exchange.
“The problem with most exchanges is that [...] you’re the broker, the exchange, the ATS, the reporting agent, you're every leg in the financial interaction," Lamb stated, further explaining:
“If we can instead remove that custodial aspect and put that custody on-chain, we end up with a system where users have provable solvency, and they know that their collateral is not being touched. [...] And so you give users that bankruptcy remoteness, that protection of their assets, they then are able to trade on a safer exchange.”
Related: Kyle Davies to donate future OPNX earnings to 3AC creditors for ‘karma’
OPNX has been controversial since its inception, as two of its co-founders, Kyle Davies and Su Zhu, were also the co-founders of failed hedge fund Three Arrows Capital. The exchange has been so heavily criticized that its CEO, Leslie Lamb, has scolded investors for allegedly misleading the public by distancing themselves from it.
In response to a question about this criticism, Lamb argued that Davies’ and Zhu’s mistakes have helped them make OPNX a better exchange.
“I think Kyle and Su kind of portrayed the zeitgeist of the last crypto bull market well, and they lost the majority of their net worth, but they are building back, and that’s what I am doing as well, and that’s what everyone should do, [...] is just build back.”
OPNX chief Leslie Lamb called out a number of venture capital firms on Twitter after some rushed to distance themselves from the company.
A number of supposed Open Exchange (OPNX) investors have been blasted by the CEO of the crypto claims trading platform after some publicly distanced themselves from the project after being named as backers.
On April 22, OPNX’s CEO Leslie Lamb tweeted that the behavior of the firms was “disgusting” and “disappointing,” saying thathey “want all the upside with little to no risk.”
“I’m here to remind everyone that’s not how entrepreneurship works, if it isn’t already clear,” Lamb added.
I’ve gotten all but 4 hours of sleep dealing with the nonsense that has ensued from transparent communications, so I’ll get straight to it.
— Leslie Lamb (@therealleslamb0) April 22, 2023
Investors want all the upside with little to no risk. But I’m here to remind everyone that’s not how entrepreneurship works, if it isn’t…
OPNX is a bankruptcy claims firm established by Kyle Davies and Su Zhu, the founders of the bankrupt crypto hedge fund Three Arrows Capital (3AC).
The drama first began on April 21 when OPNX tweeted a video of Lamb thanking a number of “major investors” for their support.
The list of investors named by OPNX included AppWorks, Susquehanna (SIG), DRW, MIAX Group, China Merchant Bank International and Token Bay Capital Nascent and Tuwaiq Limited.
1/ As we approach the launch of claims for our first estate, Celsius, we'd like to express gratitude to everyone who believed in our mission of helping 20M+ claimants.
— OPNX (@OPNX_Official) April 21, 2023
A special thank you goes to our major investors, including AppWorks, Susquehanna (SIG), DRW, MIAX Group, China pic.twitter.com/G406Y7Ponz
Nearly half of the listed backers now claim they never elected to provide funding to OPNX and have denied any and all association with the firm.
The first company to publicly deny support was decentralized finance (DeFi) trading firm Nascent, which claimed that while it bought Coinflex (FLEX) tokens, first issued by the company’s previous manifestation, it did not participate in a funding round for OPNX.
Just to clarify, Nascent did not participate in an OPNX fundraising round, we invested in FLEX tokens in early 2021.
— Nascent (@nascentxyz) April 21, 2023
Taiwan-based venture capital firm Appworks took to Twitter on April 22 to provide further clarification on its investment position stating that its funding had been “forcibly converted” from its initial holdings in CoinFLEX and that they “do not support what [Davies and Zu] did during the last days of 3AC.”
We are backers of CoinFlex and were supportive of Mark to rebuild for stakeholders. Our equity is being forcibly converted to OPNX and we have not committed capital to the new entity. We never met Su Zhu or Kyle Davies and do not support what they did during the last days of 3AC
— AppWorks (@AppWorks) April 22, 2023
Additionally, capital market company DRW Trading chose not to mince words when distancing itself from the exchange, bluntly tweeting it is "not an investor in OPNX."
DRW is not an investor in OPNX nor are any of its affiliates investors in OPNX.
— DRW (@DRWTrading) April 21, 2023
Since the public spat first played out across Twitter, FLEX, the primary token of OPNX, has plummeted more than 21%, according to TradingView data.
Cointelegraph contacted Susquehanna (SIG), MIAX Group and China Merchant for clarification on their investments in OPNX but did not immediately receive a response.
Related: OPNX quips about its early dismal volume after reporting 90,000% surge
According to OPNX’s pitch deck, which first circulated in January, the platform will allow investors to buy and sell claims on bankrupt crypto firms such as 3AC and FTX.
Unlike other claims market firms, OPNX purports to allow customers to use claims as collateral for trading. In addition, the firm stated that it could help “fill the power vacuum left by FTX” and expand into other more regulated markets like stocks and equities.
In June 2022, 3AC received a notice of default from crypto exchange Voyager Digital after failing to pay a loan of 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC).
Then on July 1, 3AC filed for bankruptcy and has been the subject of criticism from the broader crypto industry, with many of its creditors accusing its founders of running away from legal action.
A number of crypto companies have publicly stated that they will refuse to associate with anyone who supports OPNX. Regardless, CoinFLEX, the main company behind the OPNX project, has defended itself, claiming that it will help make customers of failed crypto ventures “whole again.”
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OPNX exchange has quipped about its earlier low trading volume before experiencing a big surge in volume during the last 24 hours.
Open Exchange (OPNX) has claimed to have experienced a massive surge in trading volume and has joked about its dismally low volume on its opening day.
According to an April 10 tweet by OPNX, its day one trading volume on April 4 hit a total of $13.64 but has since apparently seen a surge to $12,398 on April 9, an increase of over 90,000%.
We're thrilled to announce a significant increase in trading volume at OPNX! On day 1, our volume was a hard-fought $13.64. Today on day 5, it has surged to a magnificent $12,398. That's a remarkable percentage increase of over 90,000%. We are incredibly proud of our team's hard… pic.twitter.com/0rG9F28xzl
— OPNX (@OPNX_Official) April 10, 2023
However, new data suggests the trading volume has seen a far bigger increase during the last 24 hours.
According to CoinGecko data, OPNX’s 24-hour trading volume as of April 10 has exploded to over $179,000, representing a gain of around 24,500% since April 9.
The vast majority of the volume has come from the trading pair for Bitcoin (BTC) and Tether (USDT), with more than $178,000 worth coming from the pair.
It's unclear what exactly sparked the increase but it could be connected to the April 9 announcement from OPNX about a new market-making program to help increase its volume.
After launch, the OPNX community & journalists provided us with valuable feedback about our inadequate liquidity, which admittedly may have contributed to low trading volume. We are grateful for this insight & have taken swift action by instituting the OPNX Market Maker Program: pic.twitter.com/V1Aamfpfeg
— OPNX (@OPNX_Official) April 9, 2023
OPNX’s trading volumes may also be a result of the steady climb in the price of BTC which has seen the largest crypto by market cap cruise past $30,000 for the first time since June 2022.
Related: 3AC, Coinflex founders collaborating to raise $25M for new claims trading exchange
OPNX chief executive officer Leslie Lamb announced the exchange was open for business on April 4 and is the result of a partnership between the co-founders of crypto investment firm Coinflex and the founders of the collapsed hedge fund Three Arrows Capital (3AC), Su Zhu and Kyle Davies.
The crypto community has had a mixed response to the unveiling of OPNX and its reported trading volume.
Some comments criticized the exchange's connection with Davies and Zhu, whose whereabouts have remained unclear since the 2022 collapse of 3AC, which once held $10 billion worth of assets.
Do you sell claims on 3AC?
— sir macintosh (@macgregor_now) April 10, 2023
Others, meanwhile, ridiculed OPNX’s still relatively low trading volume, joking that Changpeng “CZ” Zhao, the CEO and founder of Binance, would be worried about the project.
CZ shaking rn
— Awawat (@Awawat_Trades) April 10, 2023
In contrast, Binance posted a 24-hour volume of over $11 billion compared to OPNX’s $179,000, as per data from CoinGecko.
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The U.S. judge presiding over the Three Arrows Capital bankruptcy case has upped the pressure on Kyle Davies to comply with a January-issued subpoena.
Kyle Davies, the co-founder of bankrupt crypto hedge fund Three Arrows Capital, has been ordered to answer the subpoena issued to him in January or risk being held in contempt of court.
The Jan. 5 subpoena was issued to Davies via Twitter following approval from a New York bankruptcy court, instructing him to provide 3AC’s liquidators with documents such as seed phrases and private keys as well as company communications and other company-related documents within 14 days.
After failing to hear from Davies, the United States Bankruptcy Judge Martin Glenn granted a motion to compel on March 22, noting that Davies can appear and contest the arguments made by 3AC liquidators, “or he can fail to appear as he has done so far, and, frankly, take his chances.”
There would be peace on Earth if we all spent more time in Bali pic.twitter.com/OgA35g81BE
— Kyle Davies (@KyleLDavies) March 23, 2023
A motion to compel is a legal request that the court will compel one party to provide evidence to the party that brought the motion.
People found to be in contempt of court during civil proceedings are usually hit with a fine, but may also be imprisoned. The purpose of civil contempt is to coerce compliance, so the severity of punishments can increase until the order is carried out.
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The current whereabouts of both Kyle Davies and fellow 3AC co-founder Su Zhu remains unknown.
Davies’s most recent tweet, on March 23, appears to show a photograph of him in Bali. However, an earlier tweet from the same day shows him standing with Su Zhu and one other person in Bahrain.
This is not Dubai. This is near World Trade Center in Bahrain pic.twitter.com/owVPctfINA
— Silv (@SilvXBT) March 22, 2023
Su Zhu also shared a tweet with a recognizable landmark in the background on the same day, however, suggesting he may be or have recently been in Dubai.
— Zhu Su 朱溯 (@zhusu) March 22, 2023
According to lawyers for 3AC’s liquidators, Davies has “chosen to ignore his duties to Three Arrows.”
Meanwhile, the pair from 3AC has teamed up with CoinFLEX to launch OPNX, a marketplace aimed at enabling claims in crypto firm bankruptcy proceedings to be bought and sold.
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