The SEC has filed a lawsuit against crypto hedge fund Galois Capital, alleging that Galois did not use qualified custodians to protect its investors' assets.
The Securities and Exchange Commission has settled a lawsuit with defunct crypto hedge fund Galois Capital.
agency Said Today Galois failed to comply with regulatory requirements by placing some of its digital assets on FTX and other crypto exchanges – entities that are not registered as qualified custodians.
The SEC alleged that Galois misled some investors about the notice period required to redeem the funds — telling them five days were needed to process the funds — while others were allowed to redeem with less notice.
No allegation of loss of funds was made by the clients in this regard.
Galois settled the SEC charges, agreeing to pay a $225,000 fine to the firm's identified defrauded investors, the statement said. Galois has neither admitted nor denied any wrongdoing in settling the charges.
“We're glad to put this matter behind us,” said Galois co-founder Kevin Zhou has been posted On X. The SEC investigation took two years, he said.
“We used Fireblocks, a qualified custodian, as a best-in-class solution to safeguard our crypto assets,” Zhou said. “While FireBlocks is not a qualified custodian, we believe they are the best solution for our needs and, in our opinion, the safest way to keep crypto safe for our investors at the time.”
About the five-day redemption requirement: While this is the firm's official policy, Zhou said, “The company thinks it's a good idea to let investors get out of the fund first if they don't want to be there. There's no need to wait the full five business days.”
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“No good deed goes unpunished,” he added.
Galois Capital gained notoriety in the crypto industry after publicly shorting Terra's LUNA token weeks before it exploded in May 2022, wiping $30 billion worth of value off the market in a matter of days.
However, the crypto hedge fund lost half of its assets in the fall of FTX in November 2022, and it subsequently A closed shop In February 2023.
The settlement with the SEC comes in the wake of news that NFT marketplace OpenCy received a Wells notice from the agency — indicating that it is currently under investigation.
Tom Carreras writes about markets for DL News. Got a tip about Galois or SEC? arrive at [email protected]
Related Topics Securities and Exchange Commission (SEC)FTX
