Hedge fund admits that half of his capital is on the FTX exchange

Galois Capital, a hedge fund whose founder is attributed to discovered the collapse of the cryptocurrency Luna this year, was surprised after almost half of his assets were trapped on the FTX crypto exchange, which applied for insolvency protection on Friday.

The co -founder of Galois, Kevin Zhou, in the past few days in a letter to the Financial Times, wrote that the fund could deduct some money from the stock exchange, but still "stuck about half of our capital on the FTX". . Based on the Galois' managed assets in June, this could amount to around $ 100 million.

"I'm deeply sorry that we are in this current situation," wrote Zhou. "We will work tirelessly to maximize our opportunities, to regain fixed capital by all means."

he added that it could take “a few years” to “recover a certain percentage” of his assets.

ftx announced on Friday that Sam Bankman-Fried would resign as Chief Executive after having failed with a last attempt to secure a rescue package. This is followed by a turbulent week in which the stock exchange admitted that it could not meet the customer's payout requirements without external funds, which caused fears that customers could face great losses.

The bankruptcy application from FTX according to Chapter 11 at a federal court in Delaware includes the US unit of FTX, Bankman-Frieds own trading group Alameda Research and around 130 associated companies. His empire was estimated at $ 32 billion a few months ago.

Industry insiders say that the fact that FTX was used by so many hedge funds and was considered one of the secure crypto trading places in the world means that many managers may be stuck on the stock exchange.

galois did not react immediately to a request for comment.

GALOIS is one of the largest crypto-focused Quant funds in the industry and managed a fortune of more than $ 200 million this summer. A large part of his trading activity is the one as a market maker, which enables him to make tiny profits from the trades of other investors.

Zhou, who worked on the digital stock exchange in Kraken before the founding of Galois, is known for his early criticism of the cryptocurrency Luna and the associated stable coin Terrausd before collapsing $ 40 billion in May.

He said in the letter that his fund had been left in FTX with the money because he had "a ton of open positions" that he had to close, and because he "underestimated the risk of solvency when he holds our funds at FTX".

he added that galois would become a creditor if FTX would register bankruptcy.

If that happens, I expect that we will get back to FTX a certain percentage of our assets over a few years, "he said.

laurence.fletcher@ft.com