By
Bhushan Akolkar
April 26th, 2024
The news of the stoppage of withdrawals is often a distress call that may imply a more menacing underlying liquidity crisis amidst the broader uncertainty in the global financial ecosystem.
Skybridge Capital, the hedge fund founded by Anthony Scaramucci, has suspended withdrawals for the Legion Strategies fund, an aftermath of the damning decline in the prices of digital currencies and stocks to which it is exposed to. Bloomberg reported the news citing people familiar with the matter.
One of the sources who spoke to Bloomberg said the suspension of redemption by the company was necessary as the Legion Strategies Fund comprises private companies which are generally difficult to sell. These private companies in the fund’s portfolio make up about 20% of the portfolio.
The sources affirmed that FTX Derivatives Exchange, the crypto trading platform co-founded by Sam Bankman-Fried is one of the private companies that Legion Strategies Fund has as its investments. The Legion Strategies Fund also has exposure to cryptocurrencies through other Skybridge dedicated funds that invest directly into those digital assets.
Reportedly, these Skybridge Capital’s other funds invest in Bitcoin (BTC), Ethereum (ETH), and Algorand (ALGO) amongst other digital currencies. Per the Bloomberg report, Legion Strategies Fund has as much as a quarter of its investments locked into these alternative funds as of the end of February this year.
Since then, there has been a massive downtime in the prices of cryptocurrency assets, coming down to hurt the Legion Strategies Fund and its liquidity pool to process withdrawals or redemption. An index of the 100 largest digital currencies has plunged by 56% this year, further highlighting the gravity of the underlying impact the industry has on the decision to halt redemptions for the fund.
Per the hold on withdrawals, Skybridge Capital, according to sources, has plans to buy back as much as 10% of the shares of the fund when the next investors are due to take back their funds which are pegged for the end of September.
Skybridge Capital Withdrawal Halt: an Avalanche on the Way?
The news of the stoppage of withdrawals is often a distress call that may imply a more menacing underlying liquidity crisis amidst the broader uncertainty in the global financial ecosystem.
Whether or not this will be the faith of Skybridge Capital is yet unknown as the report claims the Legion Strategies Fund is one of the smaller funds under management by the company. Skybridge Capital also reportedly manages a larger fund-of-funds, the Multi-Adviser Hedge Fund Portfolios with the latter holding about $2 billion in assets under management as of March 31 this year per a filing with the United States Securities and Exchange Commission (SEC).
The Multi-Adviser Hedge Fund is down by just 5.5% as of March 31.
Halting withdrawals as it relates to the digital currency ecosystem is the first step toward going bankrupt as learned from the case of Celsius Network which filed for bankruptcy after pending withdrawals on its platform for about 30 days. With the financial strain broad-based, investors may be putting a closer eye on Skybridge Capital moving forward.