Crypto entrepreneurs who lost customers’ money start a new exchange

The old adage “fool me twice, shame on me” should be ringing in your ears if you happen to be standing in line behind a new cryptocentric exchange whose founders have already fooled you once.

Why it’s important: Open Exchange, a new venue for traders expected to launch this month, is being billed as a solution for people hurt by the crypto crises. The executives are industry veterans whose own failed companies helped create that damage.

Details: Open Exchange is led by three crypto vets, two of whom are founders of the failed crypto hedge fund Three Arrows Capital, Su Zhu and Kyle Davies.

• The firm, known as 3AC, took out loans from many companies, and its inability to repay them led to a cascade of lender collapses. It filed for bankruptcy last summer.
• The third is CoinFlex’s Mark Lamb. CoinFlex filed for bankruptcy in the Seychelles last year. Lamb tried to raise about $50 million to restart withdrawals on CoinFlex last July, before the bankruptcy.

The big picture: The concept of the new exchange is to provide a market for burned crypto investors’ bankruptcy claims.

• These customers — hoping to salvage what they can from stranded investments across the crypto landscape — present an untapped market, Zhu, Davies and Lamb believe, a $20 billion market of claimants “desperately looking for a solution.”
• That solution is a way for people to monetize their claims.

Between the lines: If the claim is worth $1000, maybe someone will buy it for $300 worth of crypto and take the chance to make back more through the bankruptcy.

• It will also allow people to use their claims as margin collateral for trading.

What they say: “We’re the right team to build it,” Open Exchange’s manifesto reads, alluding to the mistakes that led to FTX’s collapse, while revealing little of the founders’ own stories related to last year’s crypto credit crisis.

Between the lines: Lamb promised the CoinFlex creditors a share of the new CoinFlex.

• It is not clear whether Open Exchange will replace CoinFlex, although the exchange’s original token is expected to be central to the new exchange.
• Lamb did not respond to multiple Axios inquiries via personal messages and social media.

Our thought bubble: Zhu, Davies and Lamb’s ambitious new plan, according to the deck, is to “dominate the crypto-claims market within 2-3 months of launch.” How? “Appeals to Claimants’ Appetite for Crypto Trading.”

• The appetite seems to exist, and it’s scary.

What we’re looking at: Zhu, Davies and Lamb have applied for $25 million in new funding to launch the exchange. Eventually, OPNX wants to offer stock trading as well.