Giant Satoshi’s Brazilian fund, which belongs to the manager Giant Steps Capital, may have lost investor money by having direct exposure to FTX, the brokerage that collapsed and stopped paying clients in early November.

More recent data on the allocation of the group’s flagship fund, the Giant Satoshi II Master, shows that in July of this year, 11.9% of the product’s net worth was in bitcoin held in FTX. This percentage was equivalent to 16 BTCs, quoted at BRL 2 million at the time.

This data is visible in the monthly reports sent to the Brazilian Securities and Exchange Commission (CVM). As it is regulated, fund managers are required to disclose a series of data about the product, including the number of shares, profitability, where the money is being allocated, among other information.

At CVM, however, it is only possible to view details about the Giant Satoshi fund until July, since the company used a legal maneuver to hide the reports of the last three months – August, September and October – from the general public.

More recent data from the Giant Satoshi II Master show that the fund had BRL 2 million in FTX (Source: CVM)

Thus, it is still not possible to know what the manager’s position was at FTX when the brokerage blocked the money of customers, including institutional ones.

O Bitcoin portal approached the Giant Steps team to find out if the manager had funds in FTX during the collapse, but until the publication of this report, the company had not responded.

Meanwhile, crypto market experts speculate whether Giant Satoshi suffered a loss by having funds in FTX. Economist and investment consultant, Lorenzo Frazzon, explains that, although it is normal market practice to use the legal period for hiding positions, “it is inconsistent to hide positions in crypto assets”.

“This goes against the principles of the crypto universe, which values ​​transparency”, says the economist. “It is very likely that they still had funds in FTX, but we will only know after the information becomes public. If they were quick, it’s possible the funds would have been withdrawn, but they would have had their futures positions zeroed out, and that may have delayed the redemption.”

Another Brazilian cryptocurrency fund hit by the FTX downfall was Titanium Cripto Structure, managed by Vórtx. In a relevant fact note released this Wednesday (23), the manager confirmed that it has cryptocurrencies trapped in the FTX, which have a negative impact of -10.48% on the equity of the Titanium Cripto Structure fund.

Frazzon explains that now it remains to wait for Giant Satoshi to come public in the same way to elucidate investors. “If they [Giant Satoshi] still had bitcoins in custody at FTX and were unable to withdraw, we need to await the position of the Fund Administrator (Banco Genial SA) on how they will proceed with marking this position to market. The most prudent thing would be to already recognize the loss of these assets, in my opinion, ”he declared.

The relationship between Giant Steps and FTX

When analyzing the history of CVM data, it is possible to see that Giant Satoshi started to gain exposure in the FTX from April of this year, maintaining the position until the most recent data available, from July.

The fund kept most of its bitcoin stored until March at Fidelity, a regulated institutional custodian in the US. In April, the fund split the position to send 20 BTC to FTX, keeping 84.1% of the asset reserve in Fidelity and 14.9% in FTX.

Positions between the two companies held at that level until July, when the bitcoin balance on FTX dropped to 16 BTC, reducing the fund’s equity exposure on the exchange by 11.9%.

It is estimated that at least 636 shareholders were exposed to the Giant Satoshi II Master, since it serves as a reference for two other products: the Giant Satoshi Cripto Advisory, the group’s most popular crypto fund, aimed at XP clients, which is also partner-investor of Giant Steps; and Giant Satoshi Cripto, offered to investors from other exchanges.

Available reports show that in addition to holding bitcoin on FTX, the fund also had exposure to the exchange’s native token, FTT. From April to July, the fund had 250,028 FTT in its composition.

Exposure to FTX’s native token, however, may be a way to pay cheaper fees within the exchange, as this was the main use of FTT, a token that lost almost all its value at the beginning of the month with the ruin from the company of Sam Bankman-fried.

Another Brazilian manager whose cryptocurrency fund was exposed to the FTT, BLP Crypto, went public to calm investors in the week that FTX stopped withdrawals, to explain that it had managed to act in time to liquidate the FTT position before the crash.

Sought after, Giant Steps did not comment on the exposure of its funds to the FTT.

Giant Satoshi’s Strategies

When Giant Satoshi launched in November last year, its strategy was limited to maintaining exposure to just the two leading cryptocurrencies, Bitcoin and Ethereum.

The big advertisement to attract investors, however, was to be the “first fund in Brazil that seeks to perform above Bitcoin”.

“As a fund with active management, capable of surfing price rises and defending against declines, Satoshi was created both for those who already invest in crypto and for those who have not yet entered this universe,” says the fund’s description. on the Giant Steps website.

The managers’ strategies, however, failed to make the fund deviate from the widespread declines in cryptocurrencies that have only worsened since the beginning of the year, with bitcoin marking its worst price in two years in November.

Giant Satoshi Crypto Advisory, the group’s flagship fund, delivered a -75.7% return to investors for the year, which represents a worse performance than bitcoin itself, whose price dropped 65.4% over the same period.

In addition to keeping bitcoin in custody, open data from the CVM shows that another fund strategy was to invest in perpetual bitcoin contracts on the futures market. The reports do not specify on which platform Giant Satoshi’s managers traded these contracts, stating only whether they were on an exchange or an organized over-the-counter market in the US.

Due to this series of factors mentioned above, the fund only lost weight throughout the year. If in January Giant Satoshi’s net worth was R$ 26 million, in October that figure was no more than R$ 13.2 million.

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