(Reuters) - Pantera Capital Management LP, a hedge fund that manages money for Fortress Investment Group LLC executives, invested about $10 million in Bitstamp Ltd months before it emerged as the world’s dominant dollar-bitcoin exchange, Bloomberg reported, citing three people briefed on the deal.
The infusion late last year ranks among the largest single investments in a bitcoin venture and is part of Pantera's strategy to build a brand in the bitcoin world, Bloomberg said. (r.reuters.com/jaq67v)
The market for the digital currency was rocked last month when Mt. Gox, once the world’s largest bitcoin exchange, ceased operations and filed for bankruptcy in Japan and the United States.
On February 11, Slovenia-based Bitstamp became the second major bitcoin exchange to halt customer withdrawals following a cyber attack, but resumed service three days later, restoring some confidence to the shaken market.
Fortress Investment said last month it incurred a $3.7 million paper loss last year on an investment it made in bitcoin.
Many bitcoin believers expect Mt. Gox’s collapse to result in a more robust system, with more sophisticated investors getting involved.
“The second wave (of bitcoin) is the polar opposite, it’s business people who are not really politically motivated ... and they’re being backed by venture capital, Wall Street companies, they have chief risk officers, chief compliance officers,” Chris Larsen, CEO of Ripple Labs Inc, an online payment system, told Reuters.
“I think it’s important to distinguish between the bitcoin protocol - which really wasn’t where the problem was - and a very weak player that was incorrectly using protocol, and that’s Mt. Gox. ... Bitstamp, Coinbase, Bitpay, Circle, there are some very well funded, very professionally run companies. Bitstamp just did a very extensive audit proving all of their balances, I know they’re just starting a routine quarterly audit,” Larsen added.
San Francisco-based Ripple Labs counts Google Inc, Andreessen Horowitz, and other Silicon Valley funds among its backers.
Fortress Group, Pantera Capital Management and Bitstamp could not immediately be reached by Reuters for comment.
(This story was corrected to fix name of company “Coinbase” in eighth paragraph)
Reporting by Supriya Kurane and Chris Peters in Bangalore and Sophie Knight in Tokyo; Editing by Ian Geoghegan