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Bitwise Faces $2 Million Lawsuit: Investors Allege Financial Misconduct

Bitwise Asset Management is facing a $2 million lawsuit from Vandelay Industries, representing the Mukamal family. The suit accuses Bitwise and its executives of significant financial misconduct. 

German government Bitcoin sell-off affecting the market
Source: Coinbackyard

Background of the Case 

In early 2018, the Mukamal family invested $1.3 million in the Bitwise HOLD 10 Private Index Fund. The family includes a retired nurse and her two sons, lawyer Theodore Mukamal and fashion stylist Andrew Mukamal. 

Why the Lawsuit Was Filed 

Tensions escalated in 2020 when Bitwise proposed shifting the fund to a publicly traded entity. Management fees increased by 25%. The plaintiffs say that these changes, which limited their alternatives, were imposed upon them during the COVID-19 market collapse. 

Allegations and Claims 

The lawsuit highlights 2021 investments totaling $4.85 million under allegedly misrepresented terms. These actions reportedly locked the Mukamals into less favorable conditions, resulting in a $1.93 million loss by early 2024. 

Vandelay Industries alleges: 

  • Breach of Fiduciary Duty 
  • Negligence 
  • Negligent Misrepresentation 
  • Fraud 
  • Conspiracy to Commit Fraud 
  • Breach of the 1934 Securities Exchange Act 

Industry Implications 

This legal battle could impact industry practices, especially in fund management and investor communication. Valued at $500 million in 2021, Bitwise manages around $3 billion in assets, supported by influential investors like Daniel Loeb and Stanley Druckenmiller. 

Bitwise’s Defense 

A Bitwise spokesperson stated that Theodore Mukamal has a history of lawsuits for personal gain. 

Bitwise’s Bitcoin ETF 

Bitwise is also the issuer of the spot Bitcoin ETF, Bitwise Bitcoin Fund (BITB). As of July 5, BITB has attracted $2.08 billion in inflows and has net assets worth $2.18 billion. 

July 10, 2024 at 11:17 am

Updated July 10, 2024 at 11:17 am

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