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A Bitcoin ATM at a shop in Halifax on Feb. 4, 2020.Andrew Vaughan/The Canadian Press

In an episode of the comedy South Park, a powerful player who’s seemingly devoted his entire life to World of Warcraft wreaks havoc in the game. Worried software developers, unable to stop him, lament: “How do you kill that which has no life?”

Similarly, in the cryptocurrency world, after repeated meltdowns, sometimes caused by the same idiots who never learn their lesson, I wonder: “How do you humble that which has no shame?”

You might remember Three Arrows Capital (3AC), the Singapore-based crypto hedge fund that lost US$1-trillion last year. It was one of the dominos that fell in the cascading crypto crash that cut bitcoin in half to a low of US$20,000 in June of last year.

One part of the duo behind 3AC, Su Zhu, is now trying to stage a comeback, with plan that is irony-upon-irony: a crypto exchange for failed crypto exchanges, on which investors who are not confident of getting their money back through the bankruptcy process can sell their claims for pennies on the dollar.

To be sure, though, I commend Mr. Zhu’s ingenuity because there does appear to indeed be a business case for this type of exchange.

Imagine, for a moment, that you use the Japanese exchange Mt. Gox, depositing $1,000 and then buying bitcoin. Alas, the platform goes down in 2014, taking your $1,000 worth of crypto before you have a chance to withdraw it. You become a creditor in Mt. Gox’s bankruptcy process.

Nearly 10 years later, today, you finally see the finish line. But there are so many other creditors who might be in line ahead of you, and there can’t possibly be enough money in Mt. Gox to cover all that it owes (which is why it went bankrupt).

What if you could have gotten some of your money back immediately – guaranteed – instead of the vague hope of some different fraction years down the line?

Well, you can sell your claim to your Mt. Gox coins to someone willing to take that risk and wait it out. That’s exactly what was on the mind of a New York private equity firm, Argo Partners, which had gone around trying to buy people’s Mt. Gox claims for 10 cents on the dollar.

The same company had also gone around trying to buy the claims that users had to money on QuadrigaCX, after the Vancouver-founded exchange’s founder, Gerald Cotten, was reported dead in 2019 and the platform collapsed.

This is the basic principle behind Mr. Zhu’s upcoming operation, OPNX. There is nothing wrong with allowing people to sell off bad debt. Banks and businesses sell off bad loans to debt collectors for pennies on the dollar all the time.

But think for a moment about the irony.

The first layer of irony is that Mr. Zhu’s OPNX appears to let people trade their claims from his collapsed 3AC. That is an implicit acknowledgement by Mr. Zhu that he had let down investors so much that, rather than waiting to see if they get back their money from 3AC, they are better off letting someone else take that risk – and Mr. Zhu would make more money off them by taking a cut off of every trade on OPNX, as how all exchanges operate.

The second layer of irony is the sheer number of collapsed crypto firms that are listed on OPNX’s website, with 10 in total.

There are now so many collapsed crypto operations, and so many creditors with such dismal hopes of getting their money back, that someone behind a collapsed crypto operation thinks there’s demand for a platform that gives creditors a chance to get back something like 10 cents on the dollar. The very existence of OPNX is an acknowledgement of the sad state of crypto these days.

And even if this sad state has produced the legitimate need for such a platform, the question arises of whether Mr. Zhu is the best person to run it.

Let’s cast aside the optics of irony. Let’s cast aside even the recent accusations from liquidators in a New York court that Mr. Zhu showed “no compliance whatsoever” with the 3AC bankruptcy process and had instead been “shamelessly” promoting OPNX. Let’s just focus on the simple reason for why, in the first place, this man is here before us, before the courts and before the public, scorned in the sight of gods and men: Mr. Zhu already lost US$1-trillion running 3AC. Who’s to say he won’t lose another trillion running OPNX?

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