Skybridge Capital suspended redemptions in the Legion Strategies Fund amid a further drop in stock and crypto asset prices.
The suspension came on July 18, 2022, as 20% of the Cayman Islands-based fund is invested in stocks of private companies that are challenging to sell, including FTX US. , exposed to digital assets through fund vehicles associated with 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., Hut8 Mining Corp., Argo Blockchain, Iris Energy, Marathon Digital Holdings and Bitfarms. The fund also holds Coinbase Class A stock. The ETF is down nearly 40% since May 3, 2022, as crypto mining stocks took a hit themselves.
No chance of liquidation, assures Scaramucci
Scaramucci emphasized in a telephonic interview with CNBC’s Andrew Ross Sorkin that the suspension was temporary, and that the decision to suspend the redemption was made with an independent board.
The board decided to temporarily suspend the redemption until Skybridge can raise capital within the fund so that when redemptions do happen, they do so in an orderly manner. The funds have no leverage, which means there is no possibility of liquidation. Around 18% of the fund has crypto exposure. Citing Sorkin’s book about the 2008 recession, Scaramucci pointed out that customers do better through suspensions.
The fund is down 30% year-over-year and up 5% this month.
Skybridge turns to crypto amid post-pandemic recession
Scaramucci, who served as communications director for the White House in 2017, recently promoted cryptocurrencies, a move that has cost hedge funds funds as bitcoin and other crypto assets come under pressure.
In April 2022 the firm was optimistic that the value of its assets could rise to $10 billion with cryptocurrencies present in the majority of the funds. At the time, nearly half of Skybridge’s assets were linked 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 large multi-advisor hedge fund portfolio dropped 5.5% for the year ended March 31, 2022, with $2 billion under management.
Speaking to CNBC on June 14, 2022, Scaramucci advised investors in bitcoin to be cautious, saying that Skybridge had bought bitcoin and ethereum amid the recent downturn.
Scaramucci has no ownership stake in the 27-year-old Legion Fund.