Bitwise Faces $2 Million Lawsuit: Investors Allege Financial Misconduct

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.