Investors have accused Bitwise of engaging in cryptocurrency fund fraud and have filed a lawsuit seeking $2 million in damages. The accusations involve Bitwise's alleged participation in a pump-and-dump scheme and deception of its investors.
The lawsuit was initiated by Vandelay Industries, representing the Mukamal family. According to the plaintiffs, top executives at Bitwise were involved in orchestrating the pump-and-dump scheme.
In 2018, the Mukamal family invested approximately $1.3 million in the Bitwise HOLD 10 Private Index Fund. Subsequently, Bitwise converted this private fund into a statutory trust, making the fund's shares tradable on the over-the-counter (OTC) market.
After liquidating their positions profitably, the Mukamal family reinvested $4.85 million into a new cryptocurrency fund named Bitwise 10 Crypto Index Fund. However, the plaintiffs claim that Bitwise's management misled them by not disclosing the lack of private share buybacks.
According to Theodore Mukamal, over the past three years, the fund's securities traded at 35% to 65% below their net asset value (NAV), resulting in $2 million in losses.
"Bitwise Asset Management CEO Hunter Horsley, along with executives Teddy Fusaro and Matt Hougan, conspired to defraud the Mukamal family. They committed securities fraud, for which we are seeking over $2 million in damages," stated the plaintiff.
Furthermore, the lawsuit alleges that Bitwise failed to inform investors about increased fees and withheld information regarding the fund's liquidity. The Mukamal family claims that this information was deliberately concealed for illegal enrichment.
"Theodore Mukamal repeatedly signed documents confirming his understanding and acceptance of the risks associated with Bitwise's digital asset funds. He previously threatened to sue and tarnish Bitwise's reputation in the press if he was not paid a large sum of money. Theodore has a history of making threats and filing lawsuits against others, former employers, and companies for personal gain. We believe his claims are entirely baseless," Bitwise commented on the lawsuit.
