Galois Capital to pay $225K to investors in SEC settlement

The former hedge fund lost a bulk of its crypto following the FTX collapse

article-image

Artwork by Crystal Le

share

The Securities and Exchange Commission charged the defunct crypto hedge fund Galois Capital with failing to properly safeguard client assets.

As part of the settlement, Galois agreed to pay $225,000 as a civil penalty. The funds will be distributed to the fund’s “harmed investors.”

Loading Tweet..

“The SEC’s order found that, beginning in July 2022, Galois Capital failed to ensure that certain crypto assets held by the private fund that it advised were maintained with a qualified custodian, a violation of the Investment Advisers Act’s Custody Rule,” the SEC said in a press release.

Galois held crypto on FTX and other non-qualified custodians, the SEC alleged. 

Read more from our opinion section: We need to talk about the dangers of custody on exchanges

“Approximately half of the fund’s assets under management from early to mid-November 2022 were lost in connection with the collapse of FTX. The SEC’s order also found that Galois Capital misled certain investors by representing to them that redemptions required at least five business days’ notice before month end while allowing other investors to redeem with fewer days’ notice,” the SEC continued.

The X account for Galois Capital said: “We used Fireblocks, a non-qualified custodian, as a best-in-class solution to secure our crypto assets. Although Fireblocks was not a qualified custodian, we believed they were the best solution for our needs and, in our opinion, the safest way to secure crypto for our investors at the time. We disclosed our use of Fireblocks in our Form ADV filing with the SEC.”

The settlement, however, does not mean that Galois agreed with or denied the SEC’s findings. As part of the deal, it agreed to a cease and desist from further violating the Advisers Act.  

“By failing to comply with Custody Rule provisions, Galois Capital exposed investors to risks that fund assets, including crypto assets, could be lost, misused or misappropriated,” said Corey Schuster, co-chief of the SEC Enforcement Division’s Asset Management Unit.

The hedge fund shut down in February of last year after the collapse of FTX. It said, at the time, that it lost $45 million that it kept on the exchange.  

Updated September 3, 2024 at 3:13 pm ET: Added statement and X post from Galois Capital.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (1).jpg

Research

As AI supercharges surveillance, privacy becomes a prerequisite and the winning stack will combine confidentiality with selective disclosure. Zcash’s Tachyon, composable standards on Ethereum/Solana, and compliance-aware pools aim to make private rails the new norm.

article-image

The derivatives giant will extend futures and options access to round-the-clock trading in early 2026

by Blockworks /
article-image

Global fiber network goes live as SEC clears 2Z token for utility use

by Blockworks /
article-image

The SPAC transaction positions Avalanche Treasury Co. as a Nasdaq-listed vehicle for institutional AVAX exposure by 2026

by Blockworks /
article-image

The collaboration brings regulated money market fund exposure to Polygon, with custody provided by Standard Chartered

by Blockworks /
article-image

FG Nexus teams with Securitize to bring its Nasdaq-listed equity onchain, offering tokenized stock trading through Ethereum

by Blockworks /
article-image

Sponsored

Taiko launches binding onchain governance and appoints three directors with expertise in global regulation, business strategy and blockchain tech

by Sponsored /