Galois Capital, a hedge fund whose founder is credited with discovering the collapse of cryptocurrency Luna this year, was caught by surprise after nearly half of its assets were left trapped in crypto exchange FTX, which filed for bankruptcy protection on Friday.
Galois co-founder Kevin Zhou wrote to investors in recent days, in a letter seen by the Financial Times, that while the fund was able to withdraw some funds from the exchange, it is still “nearly half of our capital is stuck”. FTXAnd based on Galois assets under management as of June, that could be around $100 million.
“I am deeply sorry that we found ourselves in this current situation,” Chu wrote. “We will work tirelessly to maximize our chances of recovering troubled capital by any means.”
He added that it could take “a few years” to recover a “certain percentage” of its assets.
FTX said on Friday Sam Bankman Fried resigns as CEO, after failing in a last-ditch attempt to secure a bailout deal. It comes after a turbulent week in which the exchange admitted it was unable to meet clients’ withdrawal requests without external funding, sparking fears that clients could face significant losses.
Chapter 11 of FTX bankruptcy filing In a federal court in Delaware, the FTX entity in the United States includes the Alameda Research business group owned by Bankman Fried and about 130 subsidiaries. His empire was worth $32 billion just months ago.
Industry insiders say that the fact that FTX is used by many hedge funds and is seen as one of the safest hedge funds in the world encryption Trading venues mean that many managers may have money stuck in the exchange.
Galwa did not immediately respond to a request for comment.
Galois is one of the largest crypto-focused quantitative funds in the industry and, as of this summer, has been managing more than $200 million in assets. A large part of her trading activity is as a market maker, which allows her to make small gains in the trades of other investors.
Zhou, who worked at digital exchange Kraken before creating Galois, is well known for his early criticism of Luna and its associated cryptocurrency terraUSD. 40 billion dollar collapse in May.
In the letter, he said that his fund left the money in FTX because it had “too many open positions” to close and because of “minimizing solvency risk while keeping our money in FTX.”
He added that if FTX files for bankruptcy, Galois will become a creditor.
If that happens, then “my expectation is that we will return a percentage of our assets on FTX over a few years,” he said.
“Infuriatingly humble analyst. Bacon maven. Proud food specialist. Certified reader. Avid writer. Zombie advocate. Incurable problem solver.”
UBS buys Credit Suisse in an effort to stop the banking crisis
FDIC: PR-21-2023 3/19/2023
What do you know this week