Bitwise Faces Lawsuit Over Fraud Allegations, Investors Seeks 2M for Damages

The Mukamal family, owners of Vandelay Industries, accuses Bitwise and its executives of fraud and mismanagement of digital assets. The plaintiffs filed a lawsuit in the Supreme Court of New York City and now seek $2 million in compensation for the loss. 

The defendants allege the fund manager at Bitwise Assets Management Inc. tricked them into reinvesting their capital in an underperforming trust named Bitwise HOLD 10 Private Index Fund. Speaking In an interview on July 10, Theodore Mukamal, a representative of the Mukamal Family and also a lawyer by profession, stated:

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Bitwise CEO Hunter Horsley and executives Teddy Fusaro and Matt Hougan lied to the Mukamal family and committed securities fraud for which we are seeking over $2 million in damages,

Mukamal Family Accuses Bitwise of Fraud

The Mukamal family were early investors in Bitwise and invested about $1.3 million in the company for management in April 2018. There were no financial issues until April 2021, when the exchange allegedly changed its agreement policy, converting users’ funds into Over-The-Counter (OTC) products without their consent. This step shifted private placement funds to publicly traded assets on OTC markets. Furthermore, the firm increased the management fees by 25%, causing discomfort among the investors.

By November 2021, they initiated a campaign to liquidate shares, encouraging investors to sell them at Net Asset Value (NAV). This caused a huge loss for thousands of investors since the index fund has been trading 35% to 65% lower than NAV for the past three years. 

However, in 2021, the Mukamals liquidated their assets, turning a net profit of anonymous value, and reinvested a significant amount of $4.85 million in Bitwise management. According to the family, the exchange mishandled these funds.

Meanwhile, the Mukamals found that the firm used a “pump and dump” scheme for its personal benefits since the index fund was trading at a significantly lower price than NAV; they criticized Bitwise’s performance and decided to sell their assets in April 2024, suffering a substantial loss of $1.93 million. Consequently, the family claims Bitwise to compensate for this loss due to their illegal actions. 

Allegations on Bitwise

The lawsuit highlights serious allegations against Bitwise on multiple grounds, including violation of Section 10 (b) of the Security Act 1934, conspiracy to commit fraud, breach of fiduciary duty, and negligence in its actions. Hence, the Mukamal demands Bitwise pay legal fees, compensation for loss, and other related expenses.

Theodore Mukamal, the family heir, claims that Bitwise pretends to be a legal and trustworthy firm that offers lucrative low fees to new users. But Bitwise co-founders Hunter Horsley, Teddy Fusaro, and Matt Hougan have defrauded thousands of investors and caused losses of millions of dollars.

Bitwise’s spokesperson denied the claims and stated that Theodore Mukamal has a history of making threats and filing lawsuits against companies and former employers for personal gain. He added that these claims are invalid and lack strong evidence. Moreover, Bitwise aims to actively contest these claims.

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