Crypto Hedge Fund Faces Accusations In FTX Fallout

Swiss hedge fund Tyr Capital faces accusations and a legal battle over mismanagement related to FTX losses.

What is the dispute between Tyr Capital and TGT over FTX?

In a significant development within the cryptocurrency industry, Tyr Capital Partners, a Swiss-based hedge fund, faces accusations of "criminal" mismanagement following the dramatic downfall of the FTX exchange. Allegations have emerged that the fund, which oversees $140 million in assets, disregarded internal risk limits and investor cautions about its substantial exposure to FTX. These concerns were spotlighted when a Swiss prosecutor conducted a raid on Tyr's Geneva offices in August, acting on a complaint from TGT, an investor aiming to recoup losses and assert control over assets, including a $22 million claim against FTX.

Tyr Capital logo

The dispute intensifies as TGT, representing a consortium including the crypto wealth platform Yield App, seeks to dissolve Tyr's portfolio through legal channels in the Cayman Islands. The filings reveal TGT's attempts to alert Tyr's management to the looming risks at FTX between November 7 and 10, 2022, actions taken just before FTX's bankruptcy announcement on November 11. The subsequent decision by FTX administrators to forego a revival plan leaves customers facing repayments at a fraction of their initial investment values.

Following TGT's criminal complaint in April, which accused Tyr of "the criminal offence of criminal management," Geneva's prosecutor seized documents from Tyr in a raid on August 17. This legal scrutiny places Tyr's operational decisions under a microscope, with the fund's leadership, including former heads from Deutsche Bank and Société Générale, Edouard Hindi and Olivier Trombert, defending their strategies amidst escalating legal challenges.


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Tyr Capital's Stance Amid Ongoing Investigations

Tyr Capital denies the allegations, claiming it has adhered to all regulatory and contractual obligations, and disputes TGT's narrative, particularly regarding the timely withdrawal from FTX. Despite the contentious legal backdrop, Tyr emphasizes its compliance and the unjust nature of the claims against it. The fund's assertion of no breach in internal rules by an independent review committee further complicates the narrative, especially as TGT highlights an alleged oversight in maintaining a 15% asset exposure limit to any single counterparty.

Financial Impact And Future Implications

The legal entanglement has notably impacted the fund's value, with TGT's remaining assets experiencing an 84% depreciation in dollar terms from January to October last year, translating to an $800,000 loss attributed to legal defenses and operational expenses. This decline, contested by Tyr, underscores the broader ramifications of FTX's collapse on investment strategies and the cryptocurrency hedge fund landscape.

The ongoing dispute between Tyr Capital Partners and TGT, set against the backdrop of FTX's bankruptcy, underscores the critical importance of risk management and regulatory compliance in the volatile cryptocurrency market. As legal proceedings continue, the outcome may set a precedent for investor relations and fund management practices within the industry.

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