Meet Heka Funds, the Tether whale that never stops giving

Earlier this month, Tether Holdings Limited reported a 2022 Q4 profit of $700 million and excess reserves of $960 million. The report couldn’t be independently verified but if true, these figures would be remarkable given the pain currently being felt across much of the rest of the crypto industry. 

When we examine headlines from a year ago, it’s clear that most of crypto’s big players had it tough. Many even collapsed completely. For this reason, those who have not only survived but prospered are particularly interesting.

Although it’s not possible to verify many of the claims coming directly from Tether, public information suggests that one of its little-known cousins, Heka Funds, has been consistently making money without pause.

The Malta-based company is one of Tether’s largest clients and one of the biggest Tether whales in the market. It also includes the Elysium Global Arbitrage Fund, a market-neutral crypto-fund specializing in Tether and stablecoin arbitrage. Heka Funds is based in Malta but is run from London and Monaco by Fabio Frontini of asset management company Abraxas Capital.

Read more: Tether’s shareholder capital cushion is full of contradictions

Since its inception in late 2018, Heka Funds has made a return of more than 100% supposedly arbitraging Tether and other stablecoins from one exchange to another. As of last year, it made a return of nearly 10%.

Indeed, Heka Funds appears to be one of Abraxas’ top-performing funds, making profits even bigger than its mother company.

While Abraxas registered a profit of nearly $5.8 million in 2021, Heka Funds registered a profit of €49 million ($52 million) from its operations and cashed out up to €20 million ($21 million) in performance and management fees.

It also listed up to €540 million ($570 million) in stablecoins, mostly divided between USDC and Tether, of which up to €193 million ($204 million) was borrowed.

Both Abraxas and Heka still need to list their accounts for 2022, but judging by the 10% return seen last year, Heka Funds is set to post outstanding earnings.

The Heka Funds team is under the microscope for the first time

The business has nine different bankers, including Bahamas-based Deltec Bank, Swiss Banca Creditinvest, the Italian Fineco Bank, Sparkasse Bank in Malta, and Signature Bank in the US. Among its custodians are Brittania Global Market Limited, Interactive Brokers, and StoneX.

Heka Funds’ banking administrator is Bank of Valletta, Malta’s biggest bank. Some of the banks that Heka interacts with are very prominent in the crypto-banking conduit system, such as Deltec Bank which is known to have a relationship with Tether Holdings, and Signature Bank, which has recently begun cutting ties with Binance.

Many people at Abraxas have a shared past, particularly with Frontini. Indeed, Ludovico Fillotto a director at Abraxas, graduated from the same university — Università Bocconi of Milan — as Frontini, while Abraxas co-founder and chief risk officer Luca Celati worked alongside him at Dresdner bank. Stefano Ruggiero, a portfolio manager at Abraxas, worked at Merrill Lynch also alongside Frontini.

On Twitter, Frontini seems to share an amicable relationship with the Tether gang — probably inevitable given their mutually-beneficial business relationship. However, it’s not clear if they knew each other before Tether came into existence.

Frontini and his friends appear to be a group of associates from Milan who teamed up to run their own funds and eventually made it big arbitraging Tether. But their successful venture is also shrouded in mystery and this is the first time the group is being scrutinized over its multi-billion dollar operation.

Fabio Frontini did not reply for comment.

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