FTX collapse claims another victim: The crypto hedge fund Galois

Updated: 20 February 2023

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It has been over three months since FTX, once one of the largest and most dominant crypto exchanges in the world, filed for bankruptcy. The filing was submitted on November 11th, and it impacted the crypto world strongly, leading to further crypto price drops, while a number of other businesses in the industry also suffered additional losses, which led to failures of even more companies.

With the start of 2023, the prices have started to recover somewhat, but the effects of the FTX collapse are still being felt. The newest example of this is the recent report involving Galois Capital, one of the world’s largest crypto-focused quantitative funds. The fund announced that it would have to shut down due to the severity of the FTX situation. Its co-founder, Kevin Zhou, said in a note that it is not tenable to continue operating the fund, both culturally and financially.

The end of the road for Galois Capital

The fund suffered a massive loss in November after FTX filed for bankruptcy, as $40 million were left stuck at the failed exchange. Back then, Zhou ensured investors that the fund would do everything in its power to maximize the chances of recovering the stuck capital by any means. However, he also added that it would likely take years to recover even a percentage of the stuck funds.

Since then, Galois has sold its bankruptcy claims for 16 cents on the dollar. With the start of 2023, FTX claims were going for approximately 13 cents on the dollar on Xclaim, the bankruptcy marketplace.

Zhou continued by saying that this has been a tragic saga, and it all started last May, when the collapse of LUNA and its blockchain, Terra. That led to the Three Arrows Capital (3AC) credit crisis, which, in turn, resulted in the collapse of FTX and its sister company, Alameda.

This entire series of events has resulted in a major setback for the crypto space. Zhou added that he remains hopeful for the long-term future of the industry, even now.

On Twitter, Galois Capital confirmed the reports by saying “I appreciate the outpouring of support today when the FT article came out. Thank you all for the kind words. Yes, it is true that our flagship fund is shutting down.”

I appreciate the outpouring of support today when the FT article came out. Thank you all for the kind words. Yes, it is true that our flagship fund is shutting down.

— Galois Capital (@Galois_Capital) February 20, 2023

On the positive side, the fund stressed that, despite everything, they are still closing shop with an inception-to-date performance which is still positive. They also noted that the work they have done over the past few years alongside the community has not been in vain, saying that they cannot share more than that at this time.

Although this is the end of an era for Galois, the work we have done together for the past few years has not been in vain. I can’t say more than this for now. Stay tuned.

— Galois Capital (@Galois_Capital) February 20, 2023