A hedge fund that was one of many highest profile victims of the FTX scandal when half its belongings had been trapped on the collapsed cryptocurrency change has determined to shut and return its remaining cash to buyers.

Galois Capital, which final yr had been managing round $200mn in belongings and was one of many largest crypto-focused quantitative funds, instructed buyers that it had halted all buying and selling and unwound all its positions because it was not viable, in accordance with paperwork seen by the Monetary Instances.

“Given the severity of the FTX scenario, we don’t assume it’s tenable to proceed working the fund each financially and culturally,” wrote co-founder Kevin Zhou. “As soon as once more I’m terribly sorry in regards to the present scenario we discover ourselves in.”

In November the FT revealed that Galois, regardless of pulling out some cash, nonetheless had round half its belongings caught on FTX when the change collapsed.

In a scenario harking back to Lehman Brothers in 2008, hedge funds had been left with billions of {dollars} trapped on the change, with many having seen it as one of many extra respected buying and selling platforms in an usually frivolously regulated or unregulated business.

As many as 1mn collectors have been recognized in FTX’s Delaware chapter. Its founder, Sam Bankman-Fried, is because of face trial in October on fraud fees, to which he has pleaded not responsible.

Galois mentioned within the letter that the fund’s closure would see purchasers obtain 90 per cent of the cash not trapped on FTX. The remaining 10 per cent can be briefly held again till discussions with the directors and auditor had been finalised.

Zhou additionally indicated within the letter his desire for promoting the fund’s declare on FTX, quite than going by a prolonged authorized course of. He wrote that chapter proceedings can final for a decade or extra and that distressed patrons of such claims “have extra experience than us in pursuing claims in chapter courtroom”. Since sending the letter, Galois has offered its declare for about 16 cents on the greenback.

Galois didn’t reply to a request for remark.

Zhou, who beforehand labored at digital change Kraken, is understood for his early criticism of cryptocurrency luna and linked stablecoin terraUSD forward of their $40bn collapse final yr. A lot of Galois’s buying and selling was performing as a market maker, which allowed it to make tiny features on different buyers’ trades.

“This complete tragic saga ranging from the luna collapse to the 3AC [Three Arrows Capital] credit score disaster to the FTX/Alameda failure has actually set the crypto area again considerably,” wrote Zhou. “Nevertheless, I, even now, stay longing for crypto’s long-term future.”

laurence.fletcher@ft.com