SkyBridge Capital suspended redemptions in the Legion Strategies fund amid further declines in stock and crypto asset prices.
The suspension came about on July 18, 2022, because 20% of the Cayman Islands-based fund is invested in private companies’ stocks, which are challenging to sell, including that of FTX U.S. The offshore Legion Strategies fund requiring a minimum investment of $50,000, received exposure to digital assets through fund vehicles linked to Bitcoin, Ethereum, and Algorand.
SkyBridge has invested in crypto mining companies through the First Trust SkyBridge Crypto Industry and Digital Economy ETF, launched in September 2021. Notable investments include Riot Blockchain Inc., Hut 8 Mining Corp, Argo Blockchain, Iris Energy, Marathon Digital Holdings, and Bitfarms. The fund also holds Coinbase Class A stock. The ETF is down about 40% since May 3, 2022, as crypto mining stocks themselves took a hit.
No chance of liquidation, Scaramucci reassures
Scaramucci emphasized in a telephonic interview with CNBC’s Andrew Ross Sorkin that the suspension was temporary, and the decision to suspend redemptions was made alongside an independent board.
The board decided to temporarily suspend redemptions until SkyBridge can raise capital within the fund so that when redemptions do happen, they do so in an orderly fashion. The funds have no leverage, meaning no chance of liquidation is imminent. About 18% of the fund has crypto exposure. Referencing Sorkin’s book about the 2008 recession, Scaramucci pointed out that clients do better through suspensions.
The fund is down 30% year-to-date and is up 5% this month.
SkyBridge turned to crypto amid a post-pandemic slowdown
Scaramucci, who briefly served as communications director for the White House in 2017, made a recent push into cryptocurrencies, a move that has cost the fund of hedge funds as bitcoin and other crypto assets come under pressure.
In April 2022 the firm was optimistic that its assets’ value could grow to $10 billion with cryptocurrencies present in most funds. At the time, nearly half of SkyBridge’s assets had links to Bitcoin, Algorand, Ethereum, and crypto-linked stocks. With this strategy, SkyBridge was hoping to recover from a post-pandemic world with slow economic growth.
SkyBridge’s larger Multi-Adviser Hedge Fund Portfolios dropped 5.5% for the year ending March 31, 2022, with $2 billion under management.
Speaking to CNBC on June 14, 2022, Scaramucci advised investors in bitcoin to stay circumspect and said that SkyBridge had purchased bitcoin and Ethereum amidst the recent downturn.
Scaramucci has no ownership stake in the 27-year-old Legion fund.