SkyBridge Capital suspended redemptions in the Legion Strategies fund amid further declined status in stock and crypto asset prices.
The suspension arrived on July 18, 2022, because 20% of the Cayman Islands-based fund got invested in private entities’ stocks, which are items hard to sell, including that of FTX U.S. The offshore Legion Strategies fund needing a minimum investment of $50,000, received exposure to crypto assets through fund vehicles connected to Bitcoin, Ethereum, and even Algorand.
SkyBridge has already invested in crypto mining entities through the First Trust SkyBridge Crypto Industry and Digital Economy ETF, released in September 2021. The investments include Riot Blockchain Inc., Hut 8 Mining Corp, Iris Energy, and Bitfarms. The fund also counts on Coinbase Class A stock. The ETF crumbled down at least 40% since May 3, 2022, as crypto mining stocks suffered damage.
According to Scaramucci, there are No chances of liquidation
Scaramucci explained in a telephonic interview with CNBC’s Andrew Ross Sorkin that the suspension was just a temporary measure, and the decision to stop redemptions got made alongside an independent board.
The board decided to temporarily stop redemptions until SkyBridge can collect enough capital within the fund so that, when the saving happen, they do so in an orderly fashion. The funds have zero attachment, meaning there are zero opportunities for liquidation.
On the other hand, at least 18% of the fund has crypto exposure. Highlighting Sorkin’s book about the 2008 financial crisis, Scaramucci expressed that clients do better through suspensions. The fund got down 30% year-to-date and is up 5% this month.
SkyBridge Turned to Crypto Amid a Post-Pandemic Decline
Scaramucci, who briefly worked as communications director for the White House in 2017, made a recent push into digital assets, a decision that has cost the fund of hedge funds as bitcoin and other cryptocurrencies come under pressure amid the crypto winter.
In April 2022, the firm showed an optimistic stance about how the assets’ value could reach $10 billion with digital assets that appear in most funds. At the time, nearly half of SkyBridge’s assets had ties to Bitcoin, Algorand, Ethereum, and crypto-linked stocks. Along with this plan, SkyBridge expected to recover in a post-pandemic world with slow economic evolution.
SkyBridge’s most prominent Multi-Adviser Hedge Fund Portfolios crumbled 5.5% for 2022, with $2 billion under control.
Regarding CNBC on June 14, 2022, Scaramucci warned investors in bitcoin to stay cautious and said that SkyBridge had acquired bitcoin and Ethereum amidst the recent downturn. He firmly believes digital assets will recover from the “bloodbath” if market participants keep avoiding the current situation.
He said he got encouraged by the fact that Bitcoin was above 50% of the overall crypto market cap, which is another sign that there is an approach to quality about that situation. He said he would recommend people to stay disciplined and quiet.
The Skybridge founder said the company had acquired bitcoin and Ethereum, and it controls a private stake in FTX. FTX is doing well. It’s gaining market share and is a profitable entity. Scaramucci added that the company is ready for any situation, including a further price dip.
By: Jenson Nuñez
