Mike Novogratz’s Crypto Trading Desk Lost $136 Million in Nine Months

Mike Novogratz

The bad year for traders at Mike Novogratz’s cryptocurrency merchant bank got even worse in the third quarter — and that was before the market fell out of bed this month.

Net realized and unrealized losses on digital assets at Galaxy Digital Holdings LP’s trading operation totaled about $41 million in the third quarter, bringing losses for the first nine months of the year to $136 million, according to company filings this week. The latest hit was caused in large part by losing bets on Ether, Bitcoin and XRP, Galaxy Digital said.

Novogratz, a former Goldman Sachs Group Inc. partner and hedge fund manager, was among the most high-profile Wall Streeters to jump headfirst into the crypto craze as prices for digital assets soared in recent years. His firm, which is part-owned by Toronto-listed Galaxy Digital Holdings Ltd., has to report detailed financial statements, providing a rare window into how professional traders are coping with this year’s virtual currency crash.

Galaxy Digital blamed its poor third-quarter trading results in part on tepid trading volumes and increased competition for arbitrage opportunities.

“While we continue to improve and strengthen our trading business, lack of overall trading volume in cryptocurrencies has been a headwind,” the firm said in a filing. It said the fair value of its digital assets, net of short positions, stood at $90.6 million at the end of September and that the assets cost $172.7 million.

Fiona Choi, head of investor relations and corporate communications at Galaxy Digital, didn’t immediately respond to an email seeking comment.

The Bloomberg Galaxy Crypto Index, which was established by Galaxy Digital in partnership with Bloomberg LP, the parent of Bloomberg News, tumbled 11 percent in the third quarter as the market grappled with ongoing security and regulatory concerns and a dearth of institutional investment. It has since tumbled another 44 percent. As for Galaxy Digital’s shares, they’re trading at a record low after sinking 55 percent this month.

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