Galois Capital, a crypto hedge fund that famously bet against Terra’s Luna token and once boasted $200 million in assets, told investors that it was shuttering after previously admitting that half of its assets were trapped on FTX, the now-bankrupt cryptocurrency exchange.
Kevin Zhou, founder of the fund and former head of trading at cryptocurrency exchange Kraken, said Galois has stopped all trading and will return 90% of the remaining money it still has under its control to its clients, according to documents reviewed by the Financial Times. The other 10% will be held back until the now-defunct fund finalizes agreements with its administrators and auditors.
Galois did not immediately respond to a request for comment when contacted by Fortune. The company confirmed the initial reports on Twitter.
I appreciate the outpouring of support today when the FT article came out. Thank you all for the kind words. Yes, it is true that our flagship fund is shutting down.
— Galois Capital (@Galois_Capital) February 20, 2023
“Although this is the end of an era for Galois, the work we have done together for the past few years has not been in vain,” the company wrote in a follow-up post. “I can’t say more than this for now.”
The closure of Galois marks yet another fatality in the wake of FTX’s spectacular collapse in November. After the cryptocurrency exchange, headed by founder Sam Bankman-Fried, declared Chapter 11 bankruptcy, other crypto firms began foundering. These included BlockFi, a crypto lender, and the lending arm of Genesis, owned by Barry Silbert, one of crypto’s richest and most influential investors. The bankruptcy case for BlockFi is ongoing, and Genesis recently announced that it came to initial terms with its main creditors.
Galois, for its part, confirmed on Twitter that rather than waiting out FTX’s bankruptcy proceedings, it’s decided to sell its claim against FTX to another buyer. (Bankruptcy cases are lengthy and can take years. Some creditors for Mt. Gox, which went bankrupt in 2014 and was once the largest cryptocurrency exchange in the world, are only now receiving payouts, for example.)
Citing a nondisclosure agreement, Galois, which was founded in 2018, did not specify the price at which it sold its claim or to whom it was sold. It did say it worked with law firm Schulte Roth & Zabel and financial services firm BTIG to run an auction and “was happy with the result.” Claims against FTX reportedly are selling anywhere from approximately 13 cents to 20 cents on the dollar.
“Crypto will endure,” the Galois account posted on Twitter. “These setbacks are temporary.”
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