BlockTower Capital Hedge Fund Compromise

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BlockTower Capital Logo/Homepage

BlockTower Capital is a large hedge fund with an estimated $1.7b under management. Some undisclosed portion of funds went missing. An anonymous source revealed the breach to Bloomberg News. The hedge fund did not disclose this and has not provided any details.

About BlockTower Capital

"BlockTower is an institutional investment firm, applying professional trading, venture investing, credit underwriting, and portfolio management to digital and traditional assets."

"BlockTower Capital was co-founded back in 2017 by former university endowment manager Ari Paul and former investment banker Matthew Goetz." "[It] is headquartered in Miami and New York." "In 2021, it acquired rival Gamma Point Capital to launch its market-neutral fund. However, the fund was shut down last year due to the lack of investment opportunities. BlockTower officially rolled out its $150 million venture capital fund in October 2022." "The firm has invested in companies such as NFT developer Dapper Labs, game studio Sky Mavis, and Terraform Labs, the developer of the failed TerraUSD stablecoin."

"Crypto represents disruptive technology, liquid public markets, and new use cases and business models built on top of programmable blockchains.

Navigating this space requires an approach operating at the intersection of cryptography, game theory, network and behavioral economics, competitive strategy, computer science, early stage investing, credit analysis, and portfolio management.

We are a team of venture investors, traders, credit underwriters, engineers, data scientists, operators, and risk managers focused on stewarding capital and helping to responsibly build this globally-connected industry.

We partner with the teams and projects building this paradigm-shifting technology, as investors and as users, from the earliest stages to and through the liquid market journey.

And we use and build blockchain infrastructure to create the future of financial services, including securitizing traditional assets on-chain, and working with real-world credit originators to provide capital and support as they move along their growth path."

The Reality

"[L]ast year, the firm decided to close its market-neutral crypto fund due to a lack of investment opportunities, a fund that once managed over $100 million in assets."

What Happened

"BlockTower Capital’s main hedge fund has been compromised and partially drained by fraudsters. The company has $1.7 billion in assets under management."

Key Event Timeline - BlockTower Capital Hedge Fund Compromise

Date	Event	Description
May 14th, 2024 9:13:40 PM MDT	BNN BloomBerg Article	BloomBerg publishes an article about the exploit.
May 14th, 2024 9:37:58 PM MDT	PANewsLab Article	PANewsLab publishes an article about the fund compromise.
May 14th, 2024 10:21:00 PM MDT	Richard Turrin Tweet	Richard Turrin tweets that the events are "[t]errifying" and calls BlockTower the "smartest guys in the room".
May 14th, 2024 11:33:51 PM MDT	U Today Article	An article is published by U Today.
May 15th, 2024 1:43:11 AM MDT	The Block Article	The Block publishes an article on the hack.
May 17th, 2024 5:15:01 AM MDT	Ledger Insights Analysis	Ledger Insights publishes an analysis. They confirm there has been no information coming from BlockTower publicly.

Technical Details

"BlockTower Capital’s main hedge fund has been compromised and partially drained by fraudsters. The company has $1.7 billion in assets under management." "BlockTower Capital’s main hedge fund has been compromised and partially drained by fraudsters, according to people familiar with the matter, who declined to be identified discussing sensitive information."

"Blocktower uses several custodians and security is not entirely up to the custodians. It’s also the responsibility of the people authorized to access the wallets to safeguard that access."

Total Amount Lost

The total amount at risk has been estimated at $1,700,000,000 USD. The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

"Despite hiring blockchain forensic analysts to investigate the specifics of the fund theft and informing its limited partners of the incident, the stolen funds have yet to be recovered, and the hackers have not been apprehended."

"The funds are still missing and the hacker has not been apprehended, but the firm has employed blockchain forensics analysts to determine how the money was stolen and recently informed its limited partners about the heist, one of the people said. BlockTower declined to comment on the hack when contacted by Bloomberg." "The firm did not immediately respond to The Block’s request for further comment." "In public so far there’s been a deafening silence from Blocktower, which has $1.7 billion in assets under management across all funds according to Pitchbook."

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.