Bitwise Faces $2M Lawsuit : Executives Accused of Defrauding Investors

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Bitwise Asset Management is facing a lawsuit from Vandelay Industries, representing the Mukamal family, which has accused Bitwise and its top executives of fraud, negligence, and executing a “pump and dump” scheme that resulted in significant financial losses for investors and seeks $2 million in damages.

Bitwise Executives’ Alleged Misrepresentation 

In early 2018, Mukamal’s family invested about $1.3 million in the Bitwise HOLD 10 Private Index Fund. By 2020, tensions escalated as Bitwise proposed shifting the fund from private placement to a publicly traded entity on OTC markets. At the same time, management fees increased by 25%. 

According to the plaintiffs these changes were forced upon them during the COVID-19 market downturn which significantly restricted their options. The lawsuit also highlights investments totaling $4.85 million in 2021 under new terms that Bitwise executives allegedly misrepresented.

The Mukamal family alleged that the company’s top executives, CEO Hunter Horsley, President Teddy Fusaro, and CIO Matt Hougan, engaged in a ‘pump and dump’ scheme that misled the investors and resulted in over $2 million in damages.

Pump-And-Dump Scheme 

Theodore Mukamal, a son of the Mukamal family stated that a reckless and negligent pump-and-dump scheme was executed for their benefit, leaving their flagship product, the Bitwise 10 Crypto Index Fund (BITW), trading 35-65% below NAV for the past three years, devastating thousands of investors. 

By November 2020, Bitwise initiated a campaign to liquidate shares, encouraging investors to sell at a premium to NAV, which led to losses.

Moreover, the lawsuit accuses Bitwise of reckless and self-serving management practices, including breaking signed agreements and altering the structure of investments without investor consent. Multiple violations of the SEC Act of 1934 and other regulatory breaches were cited.

Serious Accusations On Bitwise!

The lawsuit brings serious accusations against Bitwise on multiple grounds including Breach of Fiduciary Duty, Negligence, Negligent Misrepresentation, Fraud, Conspiracy to commit Fraud, and Violation of Section 10(b) of the Securities Exchange Act of 1934. These allegations question Bitwise’s integrity damaging the company’s reputation. Notably, Bitwise draws support from influential investors such as Daniel Loeb and Stanley Druckenmiller.

A Bitwise spokesperson claimed that Theodore Mukamal has a history of threatening and suing other people, former employers, and companies to pursue personal gain and added that his claims are utterly without merit, and Bitiwise intends to dispute them vigorously.