Abstract
In <b><i>Operational Due Diligence on Cryptocurrency and Digital Asset Funds</i></b>, published in the Winter 2022 Due Diligence Special Issue of <b><i>The Journal of Alternative Investments</i></b><i>,</i><b>Jason Scharfman</b> of <b>Corgentum Consulting</b> outlines key developments in due diligence practices by limited partners investing in digital asset funds. He first highlights risks that are specific to cryptocurrencies as exemplified by certain fraud cases, the use of the dark web, and ransomware attacks. These issues, coupled with the rapid innovation in the crypto space, demand enhanced operational due diligence. Therefore, one important trend is increased specialization with due diligence questionnaires developed specifically for funds dealing with cryptocurrencies. A second key trend is a focus on custody arrangements, with a strong preference for hosted wallets. A third trend is the declining use of third-party background investigation services and instead combining operational due diligence with investigative due diligence.
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