- Crypto investors told DL News they can't access their money.
- About $8 million is estimated to be trapped in the fund.
- Founder Nathan Gauvin blamed 'bad actors' and 'conspiracy theories' for tense situation at $47 million fund.
Crypto investors are raising the alarm after a fund they invested in is refusing to return their deposits.
Gray Digital said it has received more than $42 million from about 1,000 depositors since it launched in June 2022.
The fund, which is run by Nathan Gauvin, the 25-year-old CEO of a New York hedge fund called Blackridge, dazzled investors with records of almost 200% yearly returns on deposits.
Gray Digital said it earns returns by trading stocks, derivatives, debt, and crypto.
Now, six depositors have told DL News that they can’t withdraw their funds. Dozen more have banded together on messaging app Discord to share their experiences.
Polished approach
Philip, an investor who said he deposited $300,000 with Gray Digital, said that Gauvin’s “polished approach and emphasis on trust” lowered his guard.
He, along with six other investors who spoke to DL News, asked for only their first names to be published, or to have their names changed due to privacy and security concerns.
Gauvin and Blackridge did not respond to multiple requests for comment.
It’s not clear how much money is trapped in the fund. One estimate by Assure DeFi, a security services firm, puts the total at around $8 million.
Several investors say Gauvin has ignored their requests for evidence of the company’s asset holdings. Screenshots seen by DL News confirm the investors’ requests.
‘Conspiracy theories’
Additional screenshots of conversations in Gray Digital’s server on Discord show Gauvin blaming the situation on bad actors.
He said these mysterious figures coordinated mass withdrawals, spread “conspiracy theories,” and contacted his own bank, leading to his account being frozen.
“These people are just going day by day and feeding their ‘intel’ to users to inflict as much damage as possible to the platform,” Gauvin said in Discord on August 26, per a screenshot viewed by DL News.
The situation has drawn the attention of the US Securities and Exchange Commission. The regulator has sent out at least one subpoena, seen by DL News, as part of a probe into the investment platform. The SEC said it does not comment on ongoing investigations.
It’s the latest instance of a private investment fund promising sky-high returns suddenly stopping withdrawals and leaving investors in the lurch.
In March, investors in Crypto4Winners, a Luxembourg-based investment fund run by convicted fraudster Luc Schiltz, faced a similar situation when the fund stopped processing withdrawals after taking in $100 million of deposits.
Crypto4Winners did not respond to requests for comment at the time.
‘Fostered trust’
Gauvin first appeared in a crypto investing community called Cryptonairz in 2021, where he made a name for himself as a financial expert.
By early 2022, Gauvin had started his own Discord group, according to screenshots viewed by DL News. A large number of the Cryptonairz community followed him.
“He fostered trust,” James, a long-time Gauvin follower and Gray Digital depositor who asked to use an alias, told DL News.
According to James, Gauvin said he was a seasoned asset manager for Blackridge, a multibillion-dollar fund.
With a community of keen investors in his orbit, Gauvin proceeded to set up and advertise his own investment opportunity. The pitch was simple: Investors could send over funds via crypto for Gauvin to invest on their behalf.
“We were told that there are funds that exist for institutional investors that aren’t available to the little guy,” Duncan, an investor who deposited $55,000 to Gray Digital and wished to use an alias, told DL News.
Soon word started to get around to other crypto communities, drawing more people in.
“A lot of us move in the same circles,” Duncan said. “When someone mentions a great way to invest and make money, we tend to jump at the opportunity.”
10-year-old dealmaker?
In addition to saying his fund Blackridge had billions of dollars in assets under management, Gauvin also asserted that he was involved in Blackstone’s $26 billion acquisition of Hilton Hotels in 2007, according to screenshots of since-deleted Discord posts viewed by DL News.
Blackstone is a private equity giant with $1.1 trillion in assets led by billionaire Stephen Schwarzman.
According to James, Gauvin revealed in messages that he lives in Sudbury, a city some 240 miles north of Toronto. A Facebook profile with a picture of Gauvin, which has since been made private, also connects him to the Canadian city.
Records from Lockerby Composite, a high school in Sudbury, show someone called Nathan Gauvin was a student there in 2017. The school declined to comment.
If this Nathan Gauvin is the same one running Gray Digital, it means he couldn’t have been older than 10 at the time of Blackstone’s acquisition of Hilton Hotels.
Blackstone didn’t respond to a request for comment.
Screenshots of deleted Discord posts also reveal Gauvin also claimed that $80 billion asset manager Iconiq planned to invest in his fund. Iconiq didn’t respond to a request for comment.
‘I decided to invest more’
As the months went by, investors watched as their balances soared.
The fund produced monthly returns of between 14% and 18%, working out at almost 200% annually, according to the Gray Digital website.
One investor, Max, started testing withdrawals to make sure he could get his money out.
“It worked fast and flawlessly,” he said. “So I decided to invest more.”
But by July, investors said, Gray Digital had stopped processing withdrawals.
‘Investor payments have ceased.’
— Assure DeFi
In a Discord post that month, Gauvin acknowledged more than 100 requests had piled up, but reassured investors that withdrawals would be processed once he had resolved an issue with the fund’s bank.
“I tried to withdraw $14,500, which was my whole amount, on August 24 and it has been pending since then,” Max said.
Fearing the worst, several investors reached out to Assure DeFi, and requested a pro bono investigation.
“Investor payments have ceased, and no evidence has been provided to confirm the company’s asset holdings,” Assure DeFi’s report said, advising investors to contact the authorities and make formal complaints.
All the while Gauvin was going through the Discord chat logs removing many of his previous posts, according to multiple sources who spoke with DL News. His last reply to investors, they said, was on October 27.
SEC gets involved
Assure DeFi’s pseudonymous founder, El Crypto Chapo, confirmed and provided evidence to DL News that his firm had received a subpoena from the SEC to hand over all documents from its Gray Digital investigation.
“Assure DeFi has responded to it and provided the information that we have on file,” Chapo said.
Chapo also said that Assure DeFi’s investigation of onchain records showed a $8.4 million shortfall between funds Gray Digital took in and what it had previously returned to investors.
There are other hints that things are moving behind the scenes.
Gauvin was a member of Forbes Finance Council, a prestigious group of “respected finance leaders.”
In October, the council removed Gauvin from its roster, according to the investors who spoke with DL News.
Forbes Finance Council did not immediately return a request for comment.
Despite the SEC investigation, investors may be out of luck.
“These things take a long time,” said Chapo.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
