In July, a hedge fund in Jersey issued a press release announcing that it had become the first regulated fund to deal in bitcoin.
The Jersey fund, called Global Advisors Bitcoin Investment Fund (GABI), later said it was seeking $200m in assets under management. In subsequent months, mentions of GABI have been regularly prefaced by its status as the first regulated bitcoin hedge fund by everyone from the BBC to Newsweek.
Now another hedge fund is challenging GABI's claim. Crypto Currency Fund, managed by Timothy Enneking, says that it, not GABI, should rightfully be referred to as the world's first regulated fund for digital currencies.
Enneking says his fund has formally traded exclusively in digital currencies on 1st April 2014. It also changed its name to Crypto Currency Fund (CCF) on this date. It operated under the name Tera Capital Fund before this. Enneking's fund is regulated by the Cayman Islands Monetary Authority (CIMA).
Notably, Crypto Currency Fund claims returns of 392% for its investors in 2013.
Why come forward now?
A check with CIMA confirmed Enneking's dates. Crypto Currency Fund's name change in April puts it two months ahead of GABI's July press release. So why is Enneking coming forward now, four months after GABI announced itself to the world?
While wanting to establish a track record before making his vehicle known to the public, Enneking also sought to avoid the appearance of peddling 'vapourware' - products and services that are announced before they are ready to be launched on the market - which plagues the bitcoin industry.
"GABI and all these other funds that are claiming to the first this and the first that ... the first bitcoin hedge fund, whether regulated or not, is very clearly the Crypto Currency Fund," Enneking said. "I think it's important to be first."
Being first isn't just a matter of principle, though. Enneking admitted that while his fund had $6.6m under management, he is seeking to expand, and therefore is looking for more investors to park their money with him.
Enneking said CCF is branching out into 'managed portfolios', where traders who manage the fund's money can also be tasked to oversee an individual investors' portfolio independently of the fund. He added that more products are in the works.
"We have nice [assets under management], we've had it since the beginning, but of course we're looking for more funds to manage," he said.
Delving into history
Crypto Currency Fund started life as the Tera Capital Fund, which was set up in 2005 and focused on Russia's markets. Tera was managed by Altima Asset Management, the fund management company that Enneking runs.
While Enneking was running Altima, he was also engaged by a firm called Exante to do "international marketing" for its new vehicle, a digital currency fund named Bitcoin Fund. That Malta-based fund launched in late 2012.
Enneking contends that Bitcoin Fund was indeed the first fund dealing in bitcoin, although it functioned as a passive index fund tracking the price of bitcoin, thus disqualifying it from the race for the title of the first bitcoin hedge fund, which requires active management of investor money.
Around the same time, Enneking decided to get out of the Russian market. By June 2013, Tera was no longer trading in assets linked to Russia. Enneking said the fund began dabbling in bitcoin markets at this time, leading up to the fund's rechristening as Crypto Currency Fund in April 2014.
With CCF officially named in April and GABI issuing its press release in July, it would appear that the claim to the title is settled. Well, not quite, if GABI has anything to do with the matter.
When CoinDesk contacted the Jersey fund to put Enneking's claim to it, it responded with a statement from its compliance department. It attached a screenshot of incorporation records from Jersey's Companies Registry, showing that it was incorporated on 12th March 2014, in other words, 19 days before CCF gained its current name. A check at the registry confirmed the date.
"GABI was incorporated on 12th March 2014 and was therefore the first regulated fund ... we are not aware of Mr Enneking being regulated as investment managers in any jurisdiction," GABI's compliance department wrote.
GABI had more to say too. In the fund's view, the standard of oversight supplied by the Cayman Islands financial regulator is too low to be compared to the rigorous rules enforced on Jersey.
The Jersey fund pointed to the fact that in Jersey, "every aspect" of the fund was overseen by the regulator. This includes all business relationships the fund enters into. The compliance department letter also detailed other aspects of governance by Jersey, including "stringent" money-laundering checks before bitcoin supply sources are approved and reviews of operational procedures before regulatory approval.
Comparing regulation on the Cayman Islands to that on Jersey, therefore, was not appropriate, GABI said.
"To compare CIMA Mutual Fund Law with Jersey FSC's Expert Fund Regime is therefore not comparing like with like and few investors would believe that CIMA's form of 'regulation' afforded them much if any protection beyond that offered by the fact that the investment manager is regulated somewhere."
Two firms that consult hedge funds on jurisdiction and other matters that CoinDesk contacted didn't seem to agree with GABI's assessment of the Cayman Islands.
When asked about the differences in regulation between the Caymans and Jersey, Aaron Kaplan, a lawyer with New York firm Gusrae Kaplan, said his firm's experience of the Cayman Islands demonstrated that it had a "competent" court system and structure of law.
Delivering the goods
Elizabeth Tansell, a senior manager for business development with SMP Partners, a consultant on fund administration and tax matters headquartered on the Isle of Man, noted that operators of a Cayman registered fund are subject to reporting requirements. These include regulatory returns filed annually and prompt notification to investors of material changes to the fund.
So, who is the first regulated bitcoin hedge fund? While the incorporation records show GABI clearly beating CCF in creating a vehicle dedicated to bitcoin trading, Enneking can point to the fact that his fund had been trading in the cryptocurrency for 10 months prior, albeit under a different name and not exclusively dealing in digital currencies.
But perhaps the question of who's first is less important than the question of which vehicle will deliver the goods for their investors.
As Tansell points out: "No matter what regulations you have in place, if the board doesn't fulfil its function and duties, there is still an opportunity for things to go wrong."
UPDATE (20th December, 22:58 GMT): Tera Capital Fund was set up in 2005, not 1995, as originally stated. The fund's website stated the wrong founding year. CIMA records confirm it was founded in 2005.
Dispute image via Shutterstock