Crypto: Trump’s Ex-Ally’s Bitcoin Troubles Worse
The past few days have been eventful for Anthony Scaramucci, the former White House communications director under Donald Trump. He spent 11 days in the role.
“The Mooch”, as he is nicknamed, recently went around the media trying to calm the financial situation of Skybridge Capital, the fund he created and of which he is one of the managers.
Skybridge is one of the firms betting that Bitcoin, the king of cryptocurrencies, would reach $100,000 per unit. But the drop in the price of Bitcoin, and digital currencies in general, since the beginning of the year has weakened the efforts of Skybridge and more particularly of the smaller funds such as Legion Strategies.
Withdrawal suspended
The Legion Strategies fund, which claims to hold around $250 million with an 18% exposure to cryptocurrencies, recently announced its decision to suspend withdrawals from its investors.
“Along with an independent board, SkyBridge temporarily suspended redemptions in its offshore fund, Legion Strategies, on Monday, July 18,” a source close to the matter recently told TheStreet.
The suspension is mainly driven by a liquidity mismatch resulting from late-stage private investments in the fund, the person said. The SkyBridge funds do not have leverage and there is zero risk of liquidation of assets, the person added. The suspension will be in place until SkyBridge can ensure that the fund is not forced to exit positions to the detriment of investors who want to stay in.
Founded in 1994 and based in the Cayman Islands, Legion Strategies has about 24% of its net asset value in affiliated funds as of February last year, including Bitcoin Fund, Ethereum Fund, SkyBridge Algorand Fund focused on the cryptocurrencies whose names they bear.
“This number may increase in the future, and the increase may be significant,” the fund said in a regulatory filing.
Scaramucci promised that Legion Strategies will lift the suspension of withdrawals as soon as the situation improves significantly in the market.
“When things start to improve, we will release that suspension,” he declared in an interview with CNBC. “The last point I want to make is that of course everybody signed an investor agreement. This kind of flexibility. So I don’t think there are any surprises here given what’s going on in the overall market.”
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The company declined to comment.
Massive emigration
It turns out that the exodus of investors is also affecting Skybridge Capital’s flagship fund, the Skybridge Multi-Adviser Hedge Fund Portfolios, which had $2 billion under management at the end of March. According to the New York Times, investors in this flagship fund are looking to withdraw up to $890 million, about half of what the fund had at the end of March.
“We’re letting people take the exit,” Scaramucci told CNBC in another interview on July 21. “I’m sure Skybridge’s best days are still ahead.”
Skybridge used to allow customers to withdraw their money four times a year, but after suffering significant losses in 2020 at the start of the covid-19 pandemic, the firm reduced this to two windows per year. The first window is currently open, while the second window is in October. However, customers who show up during these two windows can only withdraw 16% of their money, a limit set by Skybridge.
Scaramucci said his firm had a “big position in bitcoin.”
“We bought Bitcoin for about $18,000, they saw [prices] went to $69,000 traded back to $22,000.”
Faced with an exodus of investors, Skybridge is scrambling to raise new money.
“My sales team is out there collecting money. People also like pants,” The Mooch said. – We collect money.
He added that Skybridge has doubled down on its stake in Bitcoin: “The company is committed to its cryptocurrency (…) And yes, we’re betting in the back row that this is a big part of the future.”
More than 20% of the flagship fund is in cryptocurrency-related investments, the Bitcoin evangelist said.
