Skybridge Capital suspends withdrawals for funds with exposure to cryptocurrencies

Skybridge Capital, a fund manager led by Anthony Scaramucci, has suspended withdrawals from one of its investment funds, Legion Strategies. According to the manager, the suspension occurred due to the devaluation of the cryptocurrency market.

Legion Strategies has around $230 million in assets under management, of which 25% consisted of cryptocurrency investments. With the loss of value of BTC, ETH and other cryptocurrencies, the share has dropped to just 10% of its capital.

As a source revealed to Bloomberg, the fund also invests in shares of companies linked to the sector, such as exchanges FTX and Kraken.

Fund suspends withdrawals due to market fall

Through other funds managed by Skybridge, the Legion Strategies fund has also gained exposure to cryptocurrencies. The manager’s creator, Anthony Scaramucci, is a well-known advocate of BTC and its value as an investment asset.

In addition, the fund also invests in private companies linked to the sector. In the United States, the terms “private” and “public” refer to a company’s status in relation to the stock exchange.

In this sense, a private company is one that has no shares listed on the stock exchange. Therefore, they are companies that do not have liquidity, the fund cannot easily sell its shares and, therefore, pay the requested redemptions.

According to the source, the shares of these companies represent around 20% of the fund’s total portfolio. Due to the fall in prices and the difficulty in selling the shares, the fund chose to suspend withdrawals.

Skybridge said there was no risk of liquidation or bankruptcy for Legion Strategies, but did not give a time frame for when the suspension would end. All the company said is that it took the measure to align the liquidity of investments.

“Alongside an independent board, SkyBridge temporarily suspended redemptions at its offshore fund, Legion Strategies, on Monday, July 18. The suspension is largely motivated by a liquidity mismatch resulting from late-stage private investments in the fund. There is no risk of any asset liquidation. The suspension will be in effect until SkyBridge can ensure the fund is not forced to sell assets,” a Skybridge representative said.

Skybridge Capital and cryptocurrencies

Skybridge and Scaramucci, who had a brief stint in the White House as Director of Communications in 2017, have become ardent supporters of cryptocurrencies. Five funds linked to this sector are present in the company’s portfolio

Among its many cryptocurrency initiatives, Skybridge Capital has also delivered an order to create a BTC ETF. However, the US Securities and Exchange Commission (SEC) rejected the manager’s proposal in January.

The New York-based company had about $3.5 billion in assets under management as of April, of which nearly 50% is invested in digital assets. According to Scaramucci, the idea is to transform Skybridge into “a leading crypto asset manager and consultant”.

However, the suspension of looting puts Skybridge under market scrutiny, especially after the episodes with Celsius and Three Arrows Capital (3AC). Both institutions filed for bankruptcy due to lack of liquidity during the market correction.