Does The Newest Project By 3ACs Founders Prove That Crypto Is Just Turtles All The Way Down?
There is a concept in infinite regression that you may have heard of called “turtles all the way down.” In an argument that the world is in fact flat, but rests on the back of a giant turtle, one needs to wonder:
What is that giant turtle standing on?
Of course the answer must be another turtle.
And then what is that turtle standing on?
Well “it’s turtles all the way down.”
A key point in this is that if we can’t justify the first premise, we look to deepen it and double down on the theory. We just keep going.
A lot of wild things have been sold on the blockchain. From clearly nefarious services and goods on Silk Road, to the slew of NFT projects that haven’t fulfilled their promises, or coins that went nowhere.
An upcoming platform is looking to extend the list by allowing bankruptcy claims to be traded as people wait for settlement.
Open Exchange, founded by Su Zhu and Kyle Davies (previously founders of Three Arrow Capital, 3AC ) will allow trading for claims or holding of them as portfolio margins. While not live yet, there is a waitlist for the site for those interested in joining. Of note, the countries and regions excluded from being able to use the platform are extensive, coming in at 23. This list also prohibits those residing in the United States from joining.
The founders, who published a manifesto online, open with the statement that while there is a tremendous volume of capital tied up in bankruptcy claims, most claimants aren’t pursuing them.
The manifest on their website begins as follows:
“A $20 billion market of claimants is desperately looking for a solution. This list includes FTX, Voyager, CelsiusCEL, Genesis, BlockFi, Mt Gox, and many others. Over 90% of these claimants haven’t even filled in their information yet.”
Its a valuable addressable market, but the question of whether it should be addressed or if Zhu and Davies are the right individuals to address it is of concern. Previously the two had founded 3AC which went bankrupt last summer. At its peak 3AC was overseeing just under $3 billion in assets and the claims against 3AC itself will be tradable on the new platform.
Beyond the bankruptcy, Zhu and Davies are also accused of failing in their fiduciary responsibilities to 3AC. With the motion against them stating that they “have made clear that they have no interest in complying with their obligations under United States law and to their creditors.”
The avalanche of scams and fraud that has buried the slivers of positivity coming from those outside the crypto community hasn’t been limited to headliners like FTX. As stated above, the controversy behind 3AC’s bankruptcy and the motion against the founders makes for a difficult landscape to launch a new digital product. Consider the fact that claims not yet made good on from their previous endeavor would be tradable.
Open Exchange is an interesting new addition to the ecosystem, offering ways to trade claims against companies and taking assets that may never recover their value or be accessible again and making them into some new “thing” that people can trade. This is essentially a market of speculation built on top of speculative assets locked in failed platforms. One of the platforms being that of Open Exchange’s own founders. Turtles.
The truly exciting bit about Open Exchange however is its premise, not its reality. Blockchains enable the tracking, storage, ownership and trading of anything digital that is put on them. How will trading claims against bankrupt companies pan out? Let’s wait and see.