Swiss Crypto Hedge Fund in Clash with Client over FTX Exposure: Report

Tyr Capital Partners, a crypto hedge fund based in Switzerland, is facing accusations of mismanagement from an investor, according to a Financial Times report.

Swiss prosecutors have initiated a search of the firm following allegations that started in August 2023 that Tyr Capital disregarded early warnings regarding the collapse of the FTX exchange.

Tyr Capital Partners Faces Legal Action

The legal allegations against Tyr Capital Partners were initiated by a hedge fund, TGT, that invested with the company. TGT has alleged the former negligence in addressing early warnings regarding the collapse of the FTX exchange, which has led Swiss prosecutors to investigate Tyr.

The plaintiff, TGT, is seeking to liquidate the portfolio and assume control of the remaining assets held by Tyr, which notably includes a $22 million claim against FTX. TGT claims to have cautioned Tyr’s chief investment officer, Edouard Hindi, about the financial instability of FTX between November 7 and November 10, 2022, mere days before the exchange’s collapse.

However, Tyr Capital Partners purportedly initiated efforts to withdraw its assets from FTX around November 11, coinciding with the day FTX filed for bankruptcy, according to legal documents filed in the case.

TGT further alleges that Tyr Capital Partners disregarded an internal risk mandate which stipulated that exposure to any single counterparty should not exceed 15% of assets. However, Tyr countered this claim by informing the prosecutor that an independent committee established by the fund concluded that it had not violated internal regulations, as per the legal filing obtained by the Financial Times.

Additionally, TGT reported an 84% loss in a portfolio containing its remaining assets between January and October last year. In response, Tyr said that the loss was false and wholly disputed.

Despite these allegations, Tyr Capital Partners, managing assets amounting to $140 million, has refuted any accusations of misconduct.

FTX Customers Await Fund Reimbursement

While FTX administrators have abandoned attempts to revive the exchange, it anticipates that customers’ funds will be reimbursed based on the value of their investments when FTX collapsed in November 2022. During this time, cryptocurrencies such as Bitcoin and Ethereum were valued at less than half of their current value.

Meanwhile, TGT had lodged another complaint with the Geneva prosecutor’s office in April last year, citing suspicions of “criminal management” and requesting a “dawn raid” on Tyr’s offices.

The search, during which documents were seized, occurred on August 17 last year, with Hindi, Tyr’s chief investment officer, summoned to provide information to the prosecutor. The status of the investigation remains ongoing, according to a spokesperson for the Geneva prosecutor.