Nikolas Sargeant
A high-profile cryptocurrency hedge fund firm, Tyr Capital Partners, is facing allegations of "criminal" mismanagement and has been subject to a raid by a Swiss prosecutor. The dispute revolves around losses incurred after the collapse of the crypto exchange FTX.
According to legal documents filed in the Cayman Islands by an investor named TGT, Tyr Capital Partners, based in Geneva, is accused of disregarding internal risk limits and ignoring investor warnings about its exposure to FTX. TGT, seeking to wind up the portfolio and gain control of remaining assets, including a $22 million claim against FTX, invested funds from companies like the crypto wealth platform Yield App.
Tyr Capital Partners, led by Edouard Hindi and Olivier Trombert, both with notable backgrounds in financial institutions, denies the allegations. Despite challenges faced by other hedge funds in the crypto sector, Tyr has been considered a success, managing approximately $140 million in assets and profiting from trading discrepancies in tokens like bitcoin and ether.
TGT claims it raised concerns with Tyr's chief investment officer, Edouard Hindi, about FTX's financial health between November 7 and 10, 2022, preceding the exchange's collapse. However, Tyr only attempted to withdraw assets from FTX on November 11, the day the exchange filed for bankruptcy.
FTX's administrators have abandoned plans to revive the exchange, and customers are expected to be reimbursed based on the value of their investments during FTX's collapse.
TGT filed a criminal complaint against Tyr with the Geneva prosecutor in April last year, alleging "criminal management." A search, involving the seizure of documents, took place on August 17, 2023. Tyr denies wrongdoing, stating ongoing investigations prevent detailed comments and emphasizes compliance with relevant laws and obligations.
TGT also alleges Tyr ignored an internal risk requirement limiting exposure to any single counterparty to 15% of assets. Tyr contends that an independent committee, established by the fund, found no breach of internal rules.
TGT's remaining assets suffered an 84% loss in dollar terms between January and October last year, according to FT calculations. Tyr disputes this, attributing the fall to legal costs and running expenses rather than trading decisions.
TGT claims a lack of probity in the fund's affairs, expressing lost trust and confidence due to mismanagement. It calls for an independent investigation into the fund's operations. TGT also criticizes the fund's independent committee for refusing involvement in criminal proceedings in Switzerland and allegedly failing to prevent unjustified depletion of the fund.
The fund's board and independent committee reject TGT's allegations and intend to apply to strike out the petition for winding up.
