Crypto Fund Galois Capital Has Half of Its Capital Trapped on FTX

The locked funds total around $40 million, according to co-founder Kevin Zhou.

AccessTimeIconNov 12, 2022 at 7:08 a.m. UTC
Updated Nov 12, 2022 at 7:46 a.m. UTC

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.

Crypto hedge fund Galois Capital told CoinDesk in a Telegram message on Saturday that around half of its funds are stuck on FTX, the beleaguered crypto exchange which filed for chapter 11 bankruptcy protection on Friday.

The funds locked in FTX total around $40 million, Galois co-founder Kevin Zhou said.

Galois earned acclaim earlier this year for predicting the crash of Terra, the stablecoin ecosystem whose $60 billion collapse was one of the key reasons behind crypto's plunge into its present bear market.

Depending on how the bankruptcy proceedings progress, it may take a while for Galois – or any FTX investors – to retrieve any of their funds.

In a letter to Galois investors, Zhou wrote that it could take “a few years” for the firm to recover “some percentage” of its funds. “We will work tirelessly to maximize our chances of recovering stuck capital by any means,” he told investors.

FTX was, until recently, the second-largest cryptocurrency exchange by volume, and managed to earn a high degree of trust from sophisticated investors and institutional clients relative to other platforms.

Things started to go sour for FTX when leaked documents uncovered by CoinDesk showed that the firm’s sister company, Alameda Research, was collateralizing loans with illiquid tokens – including FTX’s own FTT token.

Eventually, a bank run ensued, revealing that FTX was not backing user funds 1:1 behind the scenes – meaning the firm could not honor withdrawal requests without billions in rescue capital.

Now, according to Zhou, Galois is considering whether it should continue operating as normal, pursue an acquisition or become a proprietary trading shop.


Read more about

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.

CoinDesk - Unknown

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.