Hedge fund Galois shuts down after 50% assets stuck at crypto exchange FTX
Credits: Bloomberg

Hedge fund Galois shuts down after 50% assets stuck at crypto exchange FTX

Galois Capital, which last year had been managing about $200mn in assets and was one of the biggest crypto-focused quantitative funds, told investors that it had halted all trading and unwound all its positions as it was no longer viable, according to documents seen by the Financial Times. “Given the severity of the FTX situation, we do not think it is tenable to continue operating the fund both financially and culturally,” wrote co-founder Kevin Zhou. “Once again I’m terribly sorry about the current situation we find ourselves in.”

According to a  report, Galois Capital, one of the largest crypto-focused quantitative funds that managed approximately $200mn in assets last year, has halted all trading and unwound all its positions. Co-founder Kevin Zhou wrote that the fund is no longer financially and culturally feasible due to the severity of the FTX situation. Zhou expressed regret for the current circumstances.

Crypto Hedge Fund Galois Capital Shuts Down After Losing $40M to FTX
Credits: Coindesk

Despite withdrawing some funds, Galois had half of its assets stuck on FTX when the cryptocurrency exchange collapsed. This was similar to the Lehman Brothers situation in 2008, where hedge funds were left with billions of dollars trapped on the exchange, which was viewed as one of the more trustworthy trading platforms in a lightly regulated or unregulated industry.

FTX’s Delaware bankruptcy has identified up to one million creditors, and its founder, Sam Bankman-Fried, has pleaded not guilty to fraud charges that are due to be heard in October. Galois said in a letter to clients that 90% of their money not trapped on FTX would be returned upon the fund’s closure. The remaining 10% would be held back temporarily while discussions with administrators and auditors were concluded.

Hedge Fund Galois Capital Discloses 'Roughly Half' of the Firm's Capital  'Stuck on FTX' – Bitcoin News
Credits: Bitcoin News

Zhou stated in the letter that he preferred selling the fund’s claim on FTX rather than going through a lengthy legal process. He noted that bankruptcy proceedings could last over a decade, and distressed buyers of such claims were better equipped to pursue claims in bankruptcy court. Galois has sold its claim for around 16 cents on the dollar since the letter was sent.

Popular crypto hedge fund Galois Capital is closing shop after operating in the crypto space for six years. The fund announced earlier on 20 February that it was shutting down due to the loss it faced after the collapse of FTX last year. Galois Capital was identified as one of the most high-profile victims of Sam Bankman-Fried’s failed crypto empire.  Galois Capital will return the remaining assets to investors According to a report by the Financial Times, Galois Capital plans to return its remaining funds to its investors after closing the firm.

As per documents seen by FT, the firm informed its investors that it had halted all trading activities. In the letter to its clients, the hedge fund revealed that 90% of the funds that weren’t stuck in FTX would be returned to the investors. The remaining 10% will reportedly remain with the fund until the finalization of discussions with auditors, administrators, and other stakeholders.