- Crypto hedge fund Galois Capital has told investors it has shut down after losing $200 million in FTX
- The crypto-focused quantitative fund rescued half of its investment, but could still only offer investors 16 cents on the dollar
- Another fund could be in the works from the founders
Galois Capital, a prominent hedge fund that fell victim to the collapse of FTX last year, has told investors it is closing down, having had around $200 million in assets trapped on the platform. Investors will get just 16 cents on the dollar back from the company, which has ceased all trading and liquidated all its positions, with co-founder Kevin Zhou expressing regret over the situation and explaining that it was financially and culturally untenable to continue operating the fund due to the severity of the FTX situation.
Galois Lost $200 Million in FTX
Galois had around $400 million on FTX when the problems began for the exchange in November, and managed to pull around half its funds out before the exchange filed for bankruptcy. In the investor letter, Galois stated that clients would receive 90% of their money that is not trapped on FTX, with the remaining 10% being held temporarily until discussions with the administrators and auditor were completed.
Zhou expressed a preference for selling the fund’s claim on FTX rather than engaging in a prolonged legal process, noting that bankruptcy proceedings could last a decade or more and that buyers of distressed claims were better equipped to pursue claims in bankruptcy court. According to the Financial Times, Galois has since sold its claim for roughly 16 cents on the dollar.
Sympathy in Short Supply
Galois itself put out a tweet thread where it said that, despite the huge loss, it was proud to be one of the few FTX victims that was “closing shop with an inception-to-date performance which is still positive.”
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
However, the news that a wealthy investment firm left nearly half a billion dollars of its clients money on one unregulated exchange was met with scorn by many in the crypto space, with sympathy soon in short supply:
Talk about a hedge fund ‘hedging’ its bets by having most of its money on one centralized exchange
— Akis Apostolopoulos (@AkisApostolop) February 20, 2023
If you’re 8/9 figs fund or individual and you have 50% or more of your net worth sitting on an exchange, especially in a bear market, then you’re just dumb and don’t know a crap about risk management. https://t.co/bgrxmCJFmE
— Nika (@G_maker) February 20, 2023
The Galois thread ended with support for the crypto movement in general, and a suggestion that a new fund was already in the works…albeit one with possibly more risk management.
