A California-based cryptocurrency fund management firm, Cryptolab Capital, has left a 50-year-old crypto investor, Vlad Matveev, scratching his head and regretting his decision to invest his $250,000 with an asset manager.
Financial Times reported today that Matveev, who invested the amount with Cryptolab Capital in June 2019 with the hopes of making substantial profits via crypto trading, regardless of the market situation, lost 98.5% of his investment after the hedge fund collapsed due to the massive market sell-off in March 2020.
In his first report about the unfortunate event, an anguished Matveev said: “I trusted money to a fund manager, and all my money disappeared. What is interesting is that the ‘disappearance’ occurred within a few days after my request to redeem from the fund.”
This incident has left Vlad Matveev dumbfounded as it was unexpected. He explained that he has confidence in the market-neutral investment strategy and the founders of the hedge fund had also impressed him as smart and trustworthy guys.
“I don’t really know what happened. They said they had a diversified set of strategies,” he said.
Leverage trading gone wrong
According to Cryptolab’s explanation of the incident, the company said the fund took a leveraged position in March. It was, therefore, difficult to pull back when crypto prices tanked as they also experienced a lack of liquidity and rejection of sell orders.
Fund managers help investors to research and participate in investment strategies that they (the investors) could not execute on their own. However, according to Matveev, the GPs at Cryptolab placed all assets in a leveraged long in a single crypto asset that is highly volatile, a mistake that is uncommon for experienced institutional asset managers.
“The fund’s algorithm plowed an amount equal to three times its managed assets into XBTUSD, a leveraged trading product that allows investors to speculate on the bitcoin-dollar exchange rate,” Matveev said while citing the fund managers.
He made further explanations saying, “when the market plunged, the managers tried to reduce their position but were thwarted by a lack of liquidity and their sell orders being rejected,” adding that the crypto exchange ultimately auto-liquidated all positions on March 12.
A scam in disguise?
Vlad Matveev notes that although he signed an agreement form that he accepts the risks and he is aware that he could lose all his money, he did not “need a fund to buy Bitcoins with leverage.”
Led by Rostislav Shorgin, Cryptolab Capital presents itself as a professional crypto fund manager. However, it could be that Matveev lost his hard-earned money to yet another fraudulent company, considering the red flags on the ground, even though the firm has an OMB number on the US SEC website (it was just a filing, perhaps to mislead investors).
For starters, Vlad Matveev, before publishing his conversations with the company, said that Cryptolab had failed to cooperate. He then noted that he found four cases against Alex Butmanov, the chief research officer of Cryptolab and his company called Dream Team Investments (formerly known as DTI Algorithmic).
The most obvious red flag that Cryptolab might be fraudulent is that they have deleted all the pages on their website except the homepage, which has nothing useful than a contact email address and an email subscription form.
Among the delete pages is the management team page as shown below (https://cryptolab.capital/#executives)
Moving forward, the company lacks a good social presence, as they only have an account on Twitter and not LinkedIn or Facebook. Even on Twitter, their account is private with only 10 tweets, all of which are protected. So much for a company’s Twitter account that was created three years ago.
Vlad Matveev’s mistakes include not doing a detailed research on the CryptoLab Capital before investing with them and also willfully signing the agreement to risk his $250,000. The market sell-off in March, perhaps, gave CryptoLab the perfect opportunity to achieve its fraudulent objective.
So far, no official response has been issued by the company.
On this note, cryptocurrency investors and traders should always spend enough time to conduct proper research before investing in any project or releasing funds to any crypto asset manager.