Right from BlockFi to Genesis, a host of firms from the space that had exposure to FTX bore the brunt of its collapse. A recent report from the Financial Times revealed that hedge fund Galois is the latest one to face consequences.
The cryptocurrency-focused quantitative fund has reportedly lost a significant chunk of its capital in the collapse of FTX. Citing documents viewed, the FT report highlighted that Galois told investors that it had “halted all trading and unwound all its positions as it was no longer viable.”
In a letter, the fund’s co-founder Kevin Zhou reportedly said,
“Given the severity of the FTX situation, we do not think it is tenable to continue operating the fund both financially and culturally. Once again I’m terribly sorry about the current situation we find ourselves in.”
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Clients to receive 90% of non-trapped funds
In Q4 last year, it was brought to light that Galois still had about half of its assets stuck on FTX during the time of its collapse. It was in such a situation, even though it had already pulled out some funds. The funds locked in FTX summed up to approximately $40 million.
In the note, it was further revealed that the clients will receive 90% of the funds not trapped on FTX on its closure. The balance will be “temporarily held back until discussions with the administrators and auditor” are finalized.
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Nevertheless, the executive is bullish about cryptocurrency’s long-term sustainability game. Elaborating on the same, Zhou said,
“This entire tragic saga starting from the luna collapse to the 3AC [Three Arrows Capital] credit crisis to the FTX/Alameda failure has certainly set the crypto space back significantly. However, I, even now, remain hopeful for crypto’s long-term future.”
The executive also highlighted in the letter his inclination towards “selling the fund’s claim on FTX,” instead of choosing the legal route. He asserted that the latter procedure could last for a decade or more. Furthermore, he said that distressed buyers of such claims “have more expertise than us in pursuing claims in bankruptcy court”. FT highlighted that since sending the letter, Galois has sold its claim for approximately 16 cents on the dollar.
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