As the chaos unleashed by the digital currency market crash continues, a fund managed by former White House Director of Communications Anthony Scaramucci has suspended investor redemptions.
According to a Bloomberg report, Legion Strategies, a fund under the umbrella of Scaramucci’s SkyBridge Capital, decided to suspend redemptions after steep declines in the value of stocks and digital currencies it is exposed to. It’s the latest in a long list of withdrawal suspensions in the industry.
More details on the Legion Strategies redemption suspension
According to Bloomberg, a source familiar with the matter said the decision to suspend redemptions was due to the value of private stocks in the fund’s portfolio plummeting. The stocks comprise 20% of its holdings and include firms like Sam Bankman-Fried’s FTX.
As the news broke, longtime BTC critic Peter Schiff took to Twitter to say that he had personally warned Scaramucci that his fund would serve as exit liquidity for some of the biggest whales in the digital currency space.
I pointed out in real time and warned @Scaramucci myself that Skybridge Capital's entrance into #Bitcoin would mark the peak of the #crypto market. In fact, a lot of big players were able to cash out thanks to all the money Skybridge put into crypto and crypto related equities.
— Peter Schiff (@PeterSchiff) July 19, 2022
At one point, 25% of the net assets in Legion Strategies were digital currencies such as BTC, ETH, and ALGO. It’s understood that the firm has reduced its exposure to digital currencies which now make up 10% of its holdings. The reduction comes amidst a massive market crash, with BTC hovering around $20,000 after peaking above $65,000 in November 2021.
Overall, the digital currency market has lost $1.2 trillion in market cap since the 2021 peak, causing a tsunami of liquidations, bankruptcies, and withdrawal suspensions from some of the industry’s biggest firms.
Opinion: Is SkyBridge Capital the next fund to blow up?
Is SkyBridge Capital, or at least some of the funds under its umbrella, the next domino to fall? It’s still unclear, but suspending investor redemptions is never a sign of a healthy, liquid fund with optimistic managers.
The move by Legion Strategies is just the latest of many by digital currency firms and funds to stiff investors. Recently, lenders Celsius Network and Voyager Digital suspended withdrawals and entered Chapter 11 bankruptcy as Coinbase (NASDAQ: COIN) warned that it could use its customers’ holdings as collateral in the event of bankruptcy.
While many retail speculators pray that the crash is over and that a new bull market will start soon, all of the signs point to a different reality. For example, alongside the move by Legion Strategies to suspend redemptions, information leaked that Digital Currency Group was owed $1.2 billion by bankrupt hedge fund Three Arrows Capital, signaling the contagion is set to continue.
For anyone with their eyes open and their chips off the table, it’s crystal clear that the bottom is far from in. Whether Scaramucci’s fund survives remains to be seen, but that many more will go under and countless investors will find themselves empty-handed is a virtual certainty.
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