Axios Pro: Fintech Deals

January 17, 2023

Axios Pro Exclusive Content

Welcome back, fintech friends. We hope you enjoyed the long weekend.

Situational awareness: Crypto-focused bank Silvergate Capital reported a fourth-quarter net loss of more than $1 billion, citing a "crisis of confidence" in the sector.

1 big thing: Three Arrows founders' new pitch

Illustration of a crypto coin glowing atop a pile of receipts

Illustration: Natalie Peeples/Axios

The founders of failed hedge fund Three Arrows Capital are seeking $25 million in seed funding for a startup that will capitalize on the growing rash of crypto bankruptcies, per the Block.

Why it matters: Kyle Davies and Su Zhu are building a company with two other co-founders in the ashes of an industry blowup that they helped stoke, Lucinda writes.

Details: In a pitch deck shown to investors this month, Davies and Zhu say the startup plans to match crypto bankruptcy claim holders to potential buyers and sellers.

  • Cheekily dubbed GTX, a reference to FTX, the venture aims to eventually become a crypto and stock trading marketplace.
  • Claim holders that train on the platform will be eligible for equity in the new company based on the size of their claims.

Of note: Davies and Zhu are joined by CoinFLEX co-founders Mark Lamb and Sudhu Arumugam in the building of GTX. CoinFLEX filed for restructuring in a Seychelles court last year.

What they're saying: The "current process of buying and selling claims on competitor platforms is clunky, expensive and impossible for small claim holders to access," the pitch deck reads.

Background: Three Arrows, which Davies and Zhu co-founded, was a crypto hedge fund that officially entered liquidation in June, a collapse that sparked a broader contagion that quickly pervaded the industry.

  • The Three Arrows bankruptcy process has been messy, with liquidators saying that Davies and Zhu have been evasive and have hindered the company's ability to return funds.

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