Fortress May be First Public Company to Own Millions of Dollars in Bitcoins, Discloses $20m Worth

Nermin Hajdarbegovic
Feb 28, 2014 at 14:06 UTC
Updated Jun 27, 2014 at 15:32 UTC

Fortress Investment Group purchased $20m worth of bitcoins last year, according to a recent filing with the SEC.

Back in December it was rumoured that Fortress had plans to launch a bitcoin investment fund. The news was first reported by CNN, but it could not be confirmed until now.

Fortress is said to be developing a new investment vehicle based on bitcoin which is expected to be an unlisted Exchange Traded Fund (ETF).

The move appears to have been connected to San Francisco-based Pantera Capital. Pantera then registered an investment advisor entity called Pantera Bitcoin Advisors LLC and it filed the necessary paperwork with the Securities and Exchange Commission (SEC).

$20m for bitcoins last year

According to the 10-K filed with the SEC by Fortress, the investment group set aside $20m for the purchase of bitcoins in 2013. The $20m represents a balance sheet investment by Fortress, and no Fortress-managed funds were used in conjunction with the purchase.

The filing was scrutinized by Gil Luria, who tweeted that Fortress may be the first publicly traded company to report substantial bitcoin holdings.

As of 31st December, Fortress reported having $16,260,000 worth of bitcoins – listed as “other assets”. In addition, Fortress reported $3,702,000 of losses or unrealized gains on its bitcoin investments, but there is a bit of a caveat, as Fortress points out:

“Digital Currency (Bitcoin) – Represents Fortress’s holdings of digital currency which is recorded at the lower of cost or fair value. If fair value is below cost, Fortress records an unrealized loss measured as the excess of cost over fair value of the digital currency. Subsequently, to the extent that fair value increases, Fortress records an unrealized gain but shall not report digital currency above cost.

Fortress determines fair value based on estimated exit value using significant observable inputs as of the balance sheet date. Fortress recorded $3.7 million in unrealized losses on digital currency during 2013, which was included in gains (losses) in the Consolidated Statements of Operations.”

Still, with a balance sheet of $2.6bn, the move represents a relatively small investment for the company that may be immaterial given its holdings.

But, though the purchase may be exploratory, the price of bitcoin has dropped quite a bit since late 2013, so the $3.7m figure might be even lower now, provided Fortress is still holding on to the coins. It notably did not disclose the holdings in its third quarter filings.

What’s the endgame?

There has been quite a bit of interest in digital currencies from institutional investors. Several interesting reports have been published over the last week, including bullish reports from Wedbush Securities and PriceWaterhouseCoopers.

The Winklevoss twins are also vying for a slice of the market through the Winklevoss Bitcoin Trust. The pair have recently filed a revised ETF with the SEC, but it is still unclear when the Winklevoss ETF will launch.

Many of these developments have been overshadowed by the highly publicised collapse of Mt. Gox, DDoS attacks on major exchanges and the arrest of Charlie Shrem. However, if major institutional investors are serious about investing in bitcoin, a deflated price could be just what they need.

NYC image via shutterstock