Scaramucci's crypto shift is aimed at doubling assets.

 Scaramucci's crypto shift is aimed at doubling assets.

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After years of focusing on high-profile hedge funds, Anthony Scaramucci, whose interest in cryptocurrencies began during his brief stay in Washington, aims to refocus his SkyBridge Capital toward digital assets.

According to Scaramucci, who returned to money management at his New York-based firm after 11 days as then-President Donald Trump's director of communications in 2017, nearly half of SkyBridge's $3.5 billion under management is linked to crypto-assets such as Bitcoin, the Algorand protocol, Ethereum, and publicly traded crypto-related stocks.

The crypto focus, according to SkyBridge, may help treble assets to $10 billion, with digital assets accounting for the majority of those funds. In an interview, Scaramucci claimed, "We feel so passionately about this potential that we've changed and reorganized the business to someday be a major cryptocurrency asset manager and adviser."

Scaramucci spoke ahead of a SALT event this week in the Bahamas, which is co-sponsored by crypto exchange FTX and anticipated to gather around 2,000 people.

Here are some excerpts from Scaramucci's interview with SkyBridge executive John Darsie, who helps oversee SkyBridge's SALT conferences:

• BLOOMBERG: When did you decide to make the switch to crypto?

ANTHONY SCARAMUCCI: During the pandemic, we made the choice to relitigate our whole portfolio. There is a pre-pandemic world and a post-pandemic one, with the latter having a lot higher government deficits and a lot more growth uncertainty.

If you look at GDP growth over the last ten years, it's around 1.6 percent, which is below the trend. I'm not saying that high inflation is permanent, but if you're going to have it for a while—I'd say 18 to 36 months—you've got to put yourself in a position to be in regions with a lot of development potential. The cryptocurrency markets, in our opinion, are poised for significant expansion.

It's not without risk, but I think we'd prefer that trend over the next three to five years.

Working in Washington, where I worked for the Export-Import Bank, was a pivotal experience for me. It's hard to think it's been five years, but I was at the ExIm Bank in June 2017 for a discussion with Treasury officials discussing the potential digitalization of the dollar. And I was thinking to myself, "OK, so how are you going to achieve that?" Through the use of the blockchain.

So it was a kind of a revelation for me when I left that meeting: what the Winklevoss twins are talking about, what my pals like the Mike Novogratzes of the world are talking about I need to take this more seriously. So, after being sacked from the White House, I went back to SkyBridge and purchased the domain SkyBridgeBitcoin.com.

In August of 2020, our buddy Michael Saylor began making huge Bitcoin investments. In December, we made our first significant investment in SkyBridge, investing around $270 million as a macro in our Series G fund. Our average price was $18,500, which has proven to be an excellent starting place. However, there has been a lot of volatility. This is not a decision to be taken lightly; it is a long-term strategic decision.

DARSIE, JOHN: In the past, we had a more credit-focused return approach. We would switch between different types of hedge fund managers depending on market conditions, but over the last seven or eight years, I believe our focus has shifted to value investing, where we were attempting to achieve returns of around 8% to 10% to act as a fixed-income replacement in an investor's portfolio, given the poor performance of traditional fixed-income investments. We eventually discovered that the epidemic had caused a significant decline in the credit component of the portfolio.

More broadly, rather than trying to distribute and replace that fixed-income sort of return, we just opted to adopt a somewhat more growth-oriented approach in how we constructed the fund. We intended to put money into more growth-oriented management, both in and beyond the crypto space.

Obviously, we are positive about the industry. So we decided to invest a portion of the money previously allocated to credit managers straight into crypto assets such as Bitcoin and Ethereum, while also rotating funds into crypto-asset managers such as Multicoin, Polychain, Pantera, and others.

• The role of the SEC

BLOOMBERG: You were among the first to be turned down by the SEC for a Bitcoin spot ETF. What do you think the SEC's approach to crypto regulation will be?

• AS: We've taken the stance that the government will impose "mother bear" regulations. They aren't going to over-regulate the crypto area, and they aren't going to under-regulated it either.

We believe we are ahead of schedule. So, if we're correct and you get a cash ETF, that opens the door to more institutional and retail investors. We're attempting to train our clientele to arrive early as well. That's understandable. Our application, along with Fidelity's and a few others, was declined. As a result, it wasn't unique or personal to us.

I believe the SEC is taking the stance that because Bitcoin is traded in cash all over the world, there is no one market-clearing for all buys and sells. As a result, they are concerned about price manipulation. But, because of the markets' openness, I believe people will get more comfortable with it over time.

The Grayscale Bitcoin Trust is now the Big Kahuna. They've simply filed paperwork to convert their trust, which is now trading at a loss. They want to switch to an ETF because it would lower their expenses, but it will also benefit their clients. They're openly stating that if the SEC does not approve it, they have a July 1 deadline and would file a lawsuit.

• Cryptocurrency regulation
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• BLOOMBERG: If Grayscale files a case against the Securities and Exchange Commission, will you sign on or assist it in any way?

1. AS: The simple answer is no, we wouldn't sign on to it since we're currently refiling our Bitcoin ETF application with the SEC. I believe that the SEC will ultimately allow a cash Bitcoin ETF to be issued. As a result, I don't believe we need to be so forceful.
2. Our regulators appear to be behind other regulators, which causes discontent in the sector. They are now concerned about investor safety, having acknowledged that. As a result, we're big on regulation. We also believe they'll come out on top, which is why we're urging our customers to invest now, before the extra waves of investor demand and interest that will inevitably follow post-regulation.

This is a dangerous plan—let's honest, it's a risky strategy. But, OK, this is what we're renowned for. In markets, I want to be a Swiss Army Knife—I want to be adaptive. I want to change our business based on where markets are now, not where they were previously or where I would like them to be. However, we are cognizant of the dangers of our method.