SINGAPORE - The founders of cryptocurrency hedge fund Three Arrows Capital (3AC), which saddled investors and lenders with potentially billions of dollars of losses when it imploded in 2022, are seeking money for a new venture. Judging by reactions on Crypto Twitter, they face an uphill battle.

Mr Zhu Su and Mr Kyle Davies are seeking to raise about US$25 million (S$33 million) for a crypto exchange called GTX that will focus on trading in crypto claims. They are teaming up with the founders of CoinFlex, a digital asset exchange that filed for restructuring in the Seychelles last August.

The irony that Mr Zhu and Mr Davies, who spent months publicly sparring with 3AC liquidators working to recover assets for creditors, want to get into the business of crypto claims was not lost on detractors. Many tweets centred on the similarity between GTX’s proposed name and FTX, the crypto exchange that collapsed in November and whose founder, Sam Bankman-Fried, has been charged with crimes including fraud.

Mr Zhu and Mr Davies’ proposed venture “is akin to arsonists returning to the scene of the crime and offering to charge their victims for buckets of water”, Mr Nic Carter, a partner at crypto venture capital firm Castle Island Ventures, said in an e-mail.

The founder of Wintermute, one of the largest crypto market makers, went as far as to suggest that any investors in the planned fund raising might jeopardise their relationship with his firm.

Mr Davies and Mr Zhu declined to comment. “We are focused on building, adding new products and asset classes so that more people have access to financial markets,” CoinFlex co-founder Sudhu Arumugam said.

As news of the fund raising began spreading online, the outpouring of vitriol was such that CoinFlex released a statement to “clarify misconceptions” about the proposed venture. Among points it stressed: The firm won’t be called GTX, which was chosen as a “placeholder name”, according to the statement.

3AC’s failure was one of the most damaging events in a year marked by crypto implosions, from the TerraUSD stablecoin meltdown in May to the FTX bankruptcy in November. Its creditors include Digital Currency Group, the parent company of crypto brokerage Genesis, which filed a US$1.2 billion claim against the hedge fund.

After wrong-way leveraged bets on digital tokens toppled 3AC in June, Mr Zhu and Mr Davies initially went quiet, and their current whereabouts remain unknown.

But over the past few months, the two have become increasingly vocal on Twitter, often using the social media platform to duel with 3AC’s liquidators at Teneo, who accuse them of failing to cooperate with the unwinding process. A Teneo representative declined to comment.

Mr Zhu and Mr Davies are offering some of 3AC’s creditors the option of converting their claims into equity in the new venture, according to minutes from a Jan 11 creditors’ meeting seen by Bloomberg News. Mr Zhu himself submitted a claim in 3AC’s bankruptcy, while Mr Davies’ wife is listed as a creditor.

“We expect many institutional investors will be unwilling to invest in a new venture from the co-founders of 3AC until all pending legal and regulatory matters with 3AC, within and outside Singapore, are resolved,” said Mr Chris Holland, partner at Holland & Marie. BLOOMBERG