A $1.5 billion bet that a new blockchain could disrupt the financial services industry has gone horribly wrong.
The bet, made by an Israeli firm called Shai Hashomer, was backed by a consortium of hedge funds and investment firms led by the world’s largest private equity fund, Fidelity Investments.
The bet involved Shai’s blockchain and a new technology called Etherium.
It was one of the biggest crypto-funds bets ever made, according to the New York Times.
The $1bn bet, which was to have been made in the summer of 2018, was announced in July 2017.
Shai’s bet has gone down in flames.
But that’s not the only bad news for the blockchain.
The hedge funds involved have since been charged with fraud, according a news report published by the New Yorker.
The Securities and Exchange Commission has opened a probe into Shai, the New Republic reported.
The Securities and Public Company Commission (SEC) opened a criminal probe into the Shai-led bet in July, according an article in The New York Observer, citing unnamed sources.
Shai has denied wrongdoing.
“We’ve lost all faith in our product and its potential,” Shai wrote in an email to the Observer.
“Our investors are now on the side of the angels.
We’ve lost faith in the market.”
The New Yorker report said Shai did not disclose any financial assets before the bet.
The article added that the SEC investigation into Shani was ongoing.
The firm did not immediately respond to CNBC’s request for comment.
Shahi said in a statement to the Financial Times that it is “pleased” the SEC had opened a civil probe into its activities, but that it “continues to fight for the integrity of the cryptocurrency market and its underlying technology.”
The company said it was also “disappointed” in the New Jersey Department of Banking and Financial Services for not investigating the case.
The New York Fed declined to comment on the New Observer report.
In the wake of the fiasco, Shai is in the process of re-evaluating its ICO business, the company told CNBC.
It will hold an ICO in 2018 to raise funds to develop the blockchain, according the company.
Shae also told the Financial Post in May that it was considering moving to a new platform, Etherium, because its technology was not compatible with Ethereum.
The Shai ICO was supposed to launch in 2018, but the company has since postponed the launch due to a lack of funding.
Etherium is expected to launch by 2019.
The news of the Shani ICO’s failure comes as other blockchain companies have been rocked by issues with fundraising and regulatory scrutiny.
The blockchain platform Bitcoin.com and its ICO were shut down by the SEC in August.
The site, which raised $50 million in September, has been shuttered since, according CNN Money.
Bitcoin.com also shut down in January, citing a “host of regulatory, compliance, and compliance-related issues.”
The company has said it is considering reopening the site, as well as other platforms, if it receives enough capital.