Three Arrows Capital co-founder Kyle Davies said that “FTX, Alameda colluded to trade against clients" and "hunted" his company.
“As their biggest client, we, 3AC, were hunted and our positions liquidated,” Davies said on CNBC earlier today. "Recent employees of FTX are bragging about hunting and liquidating our position.”
CNBC said it had a statement from FTX founder Sam Bankman-Fried, who responded, “I’m shocked. 100% disagree ... there’s no truth to their allegations here.”
The claims come after months of silence from 3AC, which filed for bankruptcy protection in July after its cryptocurrency bets went south. FTX filed for bankruptcy protection on Nov. 11 after a run on its FTT token and the revelation that it had lent billions to its sister company Alameda Trading.
Stop hunting is a trading strategy that attempts to force market participants out of a position by driving the price of an asset to a level where a trader would have to exercise a stop-loss order. While the strategy is commonly used by proprietary trading firms like Alameda, access to insider information — such as the specifics of a position held on an exchange — would provide a competitive edge.
Davies suggested that while FTX and Alameda are different firms, it’s becoming clear that they “shared information” and that they were “sitting in the same room.”
“In non-crypto companies, this is just not the way it’s done," he said. “There’s a clear segregation between an exchange and any kind of proprietary trading firms.”
Davies' argument suggests that FTX employees shared the details of 3AC’s positions with traders at Alameda and then used this information to trade against them and force a stop-loss order.
Davies says that with time the truth will emerge. "We’ll find out the truth," Davies said. "And we’re looking forward to justice."
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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