Crypto markets are in turmoil since early November due to the events around FTX that has entered Chapter 11 proceedings – numerous players in the industry have seen their assets locked and it is unclear as to whether there will be any meaningful recovery to the blocked crypto holdings that were stored with the exchange. While the details about FTX’s handling of risk management issues as well as the apparent mis-appropriation of client assets to lend to related party are hair raising and simply shocking, considering the size of the company’s footprint in crypto markets, we at St. Gotthard Wealth are happy to announce that our Cayman-based digital assets fund “Digital Assets Income & Growth Fund” (DAIG) has not had any exposure to the failed company.
Aware of the fact that the emerging asset class of digital assets exposes investors to a whole new array of risk in connection with the storing and transfer processes related to digital assets, we have since DAIG’s beginnings aimed at minimizing the risk of security breaches (and also fraudulent behavior by service provider employees) through the prudent principle of not engaging directly with centralized exchanges and keeping positions with them, but to use brokers on a trade by trade.
We only work with certified and insured digital assets custody partners and have a multi-signature process in place to transfer funds held directly in cold wallets with us, with georedundant safety copies of each cold wallet being used by our operations team in Cyprus.
Again, we must stress the immense damage inflicted upon the whole digital assets market by the at best amateurish actions and decisions of FTX’s management team. However, we deem the fact noteworthy that while losses have occurred since the news of FTX being in distress, the asset class continues to see demand by investors – and the current time might well turn out to be the nadir of the ongoing crypto winter, if the past three cycles are any guide. Despite the (deservedly) very bad press around the uncovered management failings in FTX’s array of companies, the asset class is alive and progress in terms of blockchain applications is happening every day. We fear that more ‘bad actors’ will shock the crypto community, but the long-term viability of digital assets is by no means denied by the demise of FTX.