Bitwise Faces $2 Million Lawsuit
Bitwise Asset Management is being sued for $2 million by Vandelay Industries, accusing the firm of financial misconduct and misrepresentation in crypto investments.
Bitwise Asset Management faces a $2 million lawsuit filed by Vandelay Industries on behalf of the Mukamal family. The lawsuit accuses Bitwise and its executives of financial misconduct, including breach of fiduciary duty, negligence, fraud, and violating securities laws.
In early 2018, the Mukamal family invested $1.3 million in the Bitwise HOLD 10 Private Index Fund. By 2020, Bitwise proposed converting this fund into a publicly traded entity on OTC markets and increased management fees by 25%. The plaintiffs argue that these changes were forced on them during the COVID-19 downturn, leaving them with no real choice.
The plaintiffs claim Bitwise misrepresented investments in 2021 totaling $4.85 million, locking them into unfavorable terms. This led to a financial loss of nearly $1.93 million based on early 2024 net asset value calculations. The lawsuit highlights broader industry issues about how investment firms manage transitions and disclosures during market volatility.
Valued at $500 million in 2021 and managing $3 billion in assets, Bitwise is backed by notable investors like Daniel Loeb and Stanley Druckenmiller. This lawsuit may set precedents for managing crypto funds and the transparency required in investor communications.
Bitwise responded by stating that Theodore Mukamal has a history of threatening lawsuits for personal gain. They claim he signed documents accepting the risks of Bitwise's funds. Earlier this year, he allegedly threatened to sue unless paid a large sum of money. Bitwise believes his claims are baseless and plans to contest them vigorously.
Despite legal troubles, Bitwise continues its market activities. They manage the Bitwise Bitcoin Fund (BITB), a spot Bitcoin ETF with recent inflows of $2.08 billion and net assets worth $2.18 billion. Bitwise also updated filings for a spot Ethereum ETF, showing ongoing engagement in the crypto market.
This lawsuit against Bitwise highlights significant issues in the crypto asset management industry. The outcome could impact regulatory standards and industry practices, especially concerning investor protection and transparency. The case will be closely watched for its broader implications on the digital asset management landscape.
