Tron founder Justin Sun was apparently the top secret client of crypto asset manager Valkyrie. In fact, a private financial document reviewed by CoinDesk shows that Sun, one of cryptocurrency’s most influential figures, was responsible for the vast majority of assets under management in a key division of Valkyrie.
This means that a good portion of the Tron founder’s Bitcoin (BTC) holdings are stored in the US-based Valkyrie Investments. According to CoinDesk, the altcoin boss had more than $580 million in BTC stashed at the crypto asset manager at some point in August. This amounted to more than 90% of the money in Valkyrie’s largest division, Valkyrie Digital Assets LLC, the document shows.
Is the founder of Tron helping the centralization of crypto?
What is reported simply means that Valkyrie Investments, a fund manager that pitches crypto products to Wall Street investors, has relied primarily on Justin Sun, the founder of Tron as well as a controversial Chinese crypto billionaire.
Apparently, the current status of Valkyrie’s resources is unknown, and Sun also claimed to be one of Valkyrie’s largest shareholders. This is just another example of centralization in cryptocurrencies, an industry full of whales exerting disproportionate influence despite its decentralized ideals.
However, Sun’s relationship with Valkyrie has emerged in ways that have benefited his empire. For example, Valkyrie has created investment products for “Justin tokens” such as TRX from Tron and BTT from BitTorrent that other crypto asset managers claim to avoid.
In addition, it promoted Tron using marketing materials from developers of the blockchain network. It even allowed Tron to share its spotlight on Wall Street, literally, with someone wearing a T-shirt with the Tron logo joining the Valkyrie bell ringing at Nasdaq in September.
Net of the fact that individuals’ financial lives are almost always nobody’s business, Sun’s disproportionate and undisclosed percentage of Valkyrie’s assets under management (AUM) is an exception.
Indeed, the depth of the relationship between the two is a matter of public interest because it raises questions about Valkyrie’s dependence on a single client for growth
Sun is a notable and polarizing figure in the cryptocurrency industry. He is the founder of the Tron blockchain, which has generated repeated controversy.
For example, Tron issued an algorithmic stablecoin that researchers have scoffed at as a “clone” of the doomed UST/LUNA layout. Steve McClurg, Chief Investment Officer of Valkyrie Investments, was unwilling to discuss the source of Valkyrie’s client funds, citing confidentiality. Sun did not respond to a request for comment.
Tron tokens are cementing Valkyrie’s $37 million TRX trust
Based on reports, it appears that Sun’s money touched every section of the business, from separately managed accounts to trusts and even Valkyrie’s Bitcoin futures exchange-traded fund (ETF).
Having large assets under management (AUM) can help a fund manager promote itself to potential clients and even potential lenders. Moreover, the bigger is generally better as well.
For a few months this year, Valkyrie had another whale, or major investor, signing a $700 million partnership to manage treasury funds for the NEM/Symbol crypto protocol in January.
Weeks later, the company declared that its AUM had exceeded $1 billion, according to a February press release. However, that deal fell apart within months and NEM/Symbol took back its tokens, according to sources inside the protocol.
In addition, McClurg told CoinDesk that Valkyrie continues to work with NEM/Symbol and that protocol does not appear on the private Valkyrie document that CoinDesk reviewed.
In any case, Sun’s Tron blockchain tokens anchored Valkyrie’s TRX trust, its largest trust at $37 million, according to sources close to the matter.
Justin Sun and SMAs: why did he deposit his Bitcoin there?
In October 2021 Justin Sun described himself as the largest investor in Valkyrie’s Bitcoin futures exchange-traded fund (ETF). It is not exactly clear why Sun, an experienced cryptocurrency founder who recently told CoinDesk that he independently stores most of his tokens (and also has custody partnerships with Binance, Huobi, and Fireblocks), would put so many Bitcoin in an expensive SMA.
SMAs are portfolio management products that Valkyrie sells to investors who wish to own their cryptocurrencies directly, but leaving the buying and selling to a fund manager.
Valkyrie also charged a 1.5% fee when it officially launched its SMA service in October. John Key, the former head of Valkyrie’s SMA product, said Sun’s SMA was an institutional-type product that differed from retail offerings.
Having a whale in an SMA does not necessarily pose a threat to customers with money in other products. However, it could become problematic for the asset manager’s income from fees, and its ability to pay staff, if that client decided to leave.
Chris McHugh, professor of economics at Tufts University, said on the subject:
“If you had a hedge fund with six out of seven pieces in one player’s hands, you couldn’t swing the budget, if you know what I mean.”