Crypto hedge fund Galois Capital has confirmed it is closing the doors of its flagship fund after reports continue to grow about the fund’s exposure to FTX. Galois joins the ranks of BlockFi, Sequoia Capital, Genesis and other companies that have been caught in the FTX crossfire.
It takes time for the dominoes to fall, and although the collapse of FTX was almost 4 months in the making, the collapse of Galois was no surprise to some. Let’s review what was revealed in the early stages of the company’s demise.
Early Stages: What We Know To Be
It is a great fall from grace of what is one of the largest crypto hedge funds; Galois at one point managed almost a quarter of a billion dollars worth of assets at that peak. In November, immediately after the fall of FTX, it was widely believed that Galois owned almost half of the assets on the FTX platform.
A report from the Financial Times on Friday largely confirmed this suspicion, comparing Galois’ fall to that of the hedge fund that collapsed to the request of Lehman Brothers collapsed in 2018. The FT report noted the letter of Galois saying that 90% of funds not in the FTX Platform will be returned to clients, with the remaining 10% held until further discussions with auditors take place. Galois began selling FTX claims for 16 cents on the dollar.
The hedge fund is led by Kevin Zhou, a respected crypto veteran who has made many ‘right calls’ in his time, including timely fades in Solana and Terra. In a departing Twitter thread (posted below), Zhou confirmed the shutdown, noting that despite exposure to FTX Galois it will close as “among the few closing shop with still positive startup performance.”
FTX's collapse is largely best articulated by one look at the chart behind it's platform token, FTT. | Source: FTT-USD on TradingView.com
FTX Fallout: Galois Not Alone
Just last month, our team covered the exit of Digital Surge, an Australian crypto exchange that had approximately $25M of FTX exposure. Digital Surge suspended operations after FTX was shut down, and has since received a partial bailout and entered into a recovery plan that allowed the exchange to resume operations this week.
Not all operations are lucky, however. The aforementioned BlockFi and Genesis exchanges have filed for bankruptcy since the FTX collapse, and the fallout from the FTX collapse is still being felt today, more than 3 months later. Chances are Galois won’t be the last domino to fall.
The news is considered a net loss for the crypto atmosphere. Zhou is generally well-respected in the space, as many of crypto’s most famous faces have expressed their support in the Twitter thread where the fund went; as the old saying goes, “this too shall pass.”
Crypto will last. These setbacks are temporary and will pass. Stay strong and good luck. I will see you.
— Galois Capital (@Galois_Capital) February 20, 2023