Citadel Securities and Soros Fund Management Made Crypto-Related Bets in Q4 2022

Ken Griffin

As the crypto industry stands at the cusp of a regulatory reckoning, Ken Griffin's Citadel Securities and George Soros' investment fund reported crypto-related bets during the last three months of 2022. The timing is curious given FTX's November collapse, but there is no way to determine if these bets were made before or after the crypto-exchange failed.

Key Takeaways

  • Both Citadel Securities and Soros Fund Management reported crypto-related investments in Q4 2022.
  • Citadel owns a 5.5% stake in Silvergate Bank, while Soros Fund Management made multiple purchases, including Marathon Digital, MicroStrategy, and Silvergate Bank.
  • The investments come at a time when the crypto market is rocky, and regulators are taking stern action against companies that don’t comply with the law.
  • The SEC has fined many crypto lenders, including Nexo and BlockFi.

Citadel and Soros Fund Invests in Crypto Space

According to Form 13F filings with the U.S. Securities and Exchange Commission (SEC), both Citadel and Soros Fund Management made crypto-related bets last quarter, but there is no way to determine whether they continue to hold those positions.

Citadel reported a 5.5% stake, including options bets, in Silvergate Capital (SI), a well-known crypto lender. The lender is actually under investigation by the United States Department of Justice (DOJ), while one lawsuit alleges that the bank “aided and abetted” FTX and Sam Bankman-Fried.

Soros Fund Management reported purchasing nearly 40 million in convertible debentures from Marathon Digital (MARA), a crypto mining company. It also purchased put options for Silvergate Capital. Another indirect crypto-exposure reported by the Soros fund was into software firm MicroStrategy (MSTR) where it invested in debt as well as purchased 50,000 call and put options. According to its SEC filings, MicroStartegy owned about 132,500 bitcoins worth a little more than $4 billion as of December 2022.

Soros' fund also reported acquiring call options in Cathie Wood's ARK Innovation ETF which also has crypto-related holdings including Coinbase.

Crypto Regulation Picking Up in the United States

To be sure, it is not clear whether these bets were made before FTX's collapse triggered a call for more stringent regulations for the crypto markets in the U.S. In recent weeks, lawmakers and regulators have upped the ante on crypto regulations, often courting controversy.

Crypto platform Kraken agreed to a $30 million settlement with the SEC and shuttered its U.S. staking-as-a-service business. The New York Department of Financial Services (NYDFS) took regulatory action against Paxos over issuing Binance USD stablecoin.

The crux of the matter is whether cryptocurrencies are securities and under the jurisdiction of the SEC. A key development in that debate would be the outcome of the Ripple vs. SEC lawsuit.

Even though the crypto market is at a bit of a crossroads, some major players in the world of finance appear keen on placing their bets. Crypto could yet see more growth from institutional investments, which could help pull the market out of its slump.

Article Sources
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  1. U.S. Securities and Exchange Commission. "Citadel Securities- Form 13F Information Table."

  2. Bloomberg. "Silvergate Faces US Fraud Probe Over FTX and Alameda Dealings."

  3. Court Listener. "Bhatia v. Silvergate Bank."

  4. U.S. Securities and Exchange Commission. "Soros Fund Management-Form 13F Information Table."

  5. MicroStrategy. "Form 8-K December 28, 2022."

  6. ARK Invest. "ARK Innovation ETF."

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