Funds With FTX Exposure Have 7% to 12% of AUM Trapped: Report

Crypto Fund Research expects a record number of investor redemption requests from crypto hedge funds in November


Source: Shutterstock


Between 25% and 40% of cryptocurrency-focused hedge funds had some level of direct exposure to FTX or the exchange’s native token, FTT, according to a new research note.

Crypto Fund Research CEO Josh Gnaizda said in an email sent to institutional investors that the hedge funds’ exposure to the beleaguered exchange — which initiated bankruptcy proceedings last week — has been on average between 7% and 12% of assets under management.

“When the smoke clears, we expect the losses from crypto hedge funds and crypto venture funds directly exposed to the FTX collapse to have associated losses of well over $1 billion and possibly as much as $5 billion,” Gnaizda told Blockworks.

Industry participants told Blockworks the toll on asset managers appears to be mounting, still.

“The number of funds getting absolutely [wrecked] by this is just starting to come to light,” one crypto hedge fund portfolio manager said. The source was granted anonymity because they were not authorized to speak to the media. 

Binance, which moved last week to potentially acquire its rival for $1 amid FTX’s “liquidity crunch,” backed out of the deal, citing “news reports regarding mishandled customer funds and alleged US agency investigations.”  

Reuters reported Sunday that at least $1 billion of customer funds were missing after FTX then-CEO Sam Bankman-Fried transferred $10 billion of FTX user funds to Alameda Research, a digital assets trading firm Bankman-Fried founded.

More than 100 crypto funds typically report monthly performance to Crypto Fund Research. The data provider has received dozens of updates from affected funds in the last several days, according to the email. 

Paradigm and Sequoia Capital have exposure to FTX of $278 million and $213 million, respectively, the firms have said in recent days. Genesis said in a tweet its exposure to the exchange amounted to $175 million.

Galaxy Digital CEO Michael Novogratz said during an earnings call last week that his firm had roughly $77 million of cash and digital assets with FTX, adding that more than half of that was in the withdrawal process. CoinShares said on Thursday that its total exposure to FTX amounts to roughly $30.3 million. 

More recently, Ikigai founder Travis Kling said his cryptoasset manager had a large majority of its assets on FTX. Bloomberg reported Sunday that crypto hedge fund Galois Capital — the investment manager that promoted an Ethereum proof-of-work (PoW) fork in August — had up to $45 million of exposure to the exchange’s meltdown.

Loading Tweet..

Crypto Fund Research also estimated that Pantera Capital has about $100 million in exposure to FTX. A spokesperson for the firm did not immediately return a request for comment. 

“The fallout will extend even to funds not directly exposed, due to spillover effects in Solana and the cryptocurrency markets more generally,” Gnaizda said. “We expect a significant portion of the affected funds to enforce gate provisions or otherwise limit/suspend redemptions temporarily.”

Crypto Fund Research expects a record number of investor redemption requests from crypto hedge funds in November that could total about $2 billion. The current record stands at $1.3 billion — set in June following the collapse of Terra’s algorithmic stablecoin.  

The overwhelming majority of crypto fund of funds have some exposure to FTX via one or more of their portfolio companies, according to the email. 

Related venture funds, too, are likely to face a difficult fundraising environment — at least until the end of the year, sources said — as potential investors question the due diligence practices of even some of the segment’s most-respected investors. 

Crypto hedge funds returned about 2% in October, despite relatively flat market conditions, according to Crypto Fund Research.

“November, however, will likely not be so kind,” Gnaizda said. “Not only do many funds face direct exposure to FTX, [but] even those not directly exposed now face the prospect of industry-wide liquidations creating strong headwinds for cryptocurrency prices in the short-term.”

Bitcoin traded around $16,500 as of 6:00 pm ET on Monday — down about 21% from a week ago and up just slightly from 24 hours prior.

Michael Bodley contributed reporting.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg


The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.


Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral



Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM


The side events were the places to be at Consensus 2024, according to attendees


Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them


I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right


Also, the ETF hype train can count out at least one member