Crypto Investment Firm BlockTower Winds Down Its Market-Neutral Fund

(Bloomberg) — Miami-based digital-asset investment firm BlockTower Capital wound down a “market-neutral” crypto fund that at one point oversaw more than $100 million with the goal of generating returns no matter which direction prices took.

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BlockTower made the decision to shutter the fund and return capital to investors earlier this year, according to Chief Executive Officer Matthew Goetz. The move followed several crypto funds’ closures since FTX’s implosion including Galois Capital, which was known for betting against the Luna token before its collapse.

“This wasn’t related to FTX losses or any particular event,” Goetz said. “Instead, it was a proactive decision we made as fiduciaries.”

Goetz didn’t elaborate on any losses related to FTX in the statement, and said the company is in a position of strength.

The opportunity for a market-neutral strategy “shrunk dramatically in the aftermath of 2022,” Blocktower Chief Information Officer Ari Paul said in a statement, adding that higher interest rates and increasing compliance challenges related to decentralized finance investment strategies also contributed to the decision to close the fund.

“This move also allows us to remain on offense and best allocate our time and energy to other more attractive opportunities,” Goetz said, noting that the firm is interested in other crypto trading strategies, “real-world” assets and the intersection of credit with blockchain technology.

BlockTower started the market-neutral fund through an acquisition in 2021 of rival Gamma Point Capital, co-founded by Sanat Rao, Rahul Rai, and Eash Aggarwal. The deal was valued at about $35 million.

Co-founded by Goetz and Paul in 2017, Blocktower’s investors include billionaire hedge-fund manager Marc Lasry and former U.S. Commodity Futures Trading Commission Chairman Christopher Giancarlo. Crypto publication The Block reported in February that a pair of top executives at BlockTower including Michael Bucella and Steve Lee left the firm.

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