Crypto Three Things (1/6)

Friday, Jan 6th 2023

Commentary

"They went into my closets looking for skeletons, but thank God, all they found were shoes, beautiful shoes." - Imelda Marcos


1) Kerfuffle Breaks in Lending Corner: Defiant (and bankrupt) crypto lender Vauld is taunting alarmed (and opaque) crypto lender Nexo, in an escalating conflict that threatens to leave a potential deal unfinished. Vauld, which was gearing up for an acquisition by Nexo, questioned its Nexo's financial health and backed off from the final takeover offer. In addition to voicing doubts about Nexo’s balance sheet, Vauld’s CEO also questioned how Nexo would handle U.S.-based clients since it is phasing out some operations after being sued in several states. Nexo hit back, accusing Vauld of pursuing its own interests and not those of its creditors. Nexo is still awaiting a final response from Vauld about whether it wants to continue with the latest proposal. 

Titan’s Takeaway: Best-case scenario for creditors – Nexo acquires Vauld and unlocks frozen accounts that held more than $330M among a group of 147,000 creditors. But at least one Vauld creditor has doubts that this will play out so cleanly. The creditor, speaking on condition of anonymity, told The Block that they "want ironclad assurance that Nexo is solvent, so we don't get swept up into another insolvency crisis." With Nexo’s patchy history, and what some see as a suspicious lack of any bad news from the company amid a rough time for lenders, we wouldn’t be surprised if Vauld took more time for its due diligence to ensure there’s nothing too scary in Nexo’s closet.

2) Multi-sig Wallet Raises $5M:
San Francisco-based crypto wallet startup Momentum Safe (MSafe) closed a $5M seed funding round led by VC firm Jump Crypto with participation from Coinbase Ventures, Circle Ventures, and others. MSafe will use the fresh capital to develop its multi-signature wallet protocol, which runs on the Aptos blockchain – a newly-released scalable network built on a programming language called Move.

Titan’s Takeaway: Multi-signature wallets – those that authorize transactions by more than one party, or at least with two private keys – have long been present in some popular blockchains such as Bitcoin and Ethereum. Multi-sig still does not exist on Aptos. But if the blockchain, which had its mainnet launch in October, wants to leapfrog rival Solana, it needs to step up its game.

3) Genesis’s Bankruptcy Woes Deepen:
The curtain may be closing on digital asset mainstay and veteran crypto lender Genesis. According to a Wall Street Journal report, the 10-year old crypto firm reduced its workforce by 30% and is now mulling a possible filing for bankruptcy. With about 145 employees left, Genesis is working with investment bank Moelis to try and find a way to secure its survival. In last year’s final quarter, Genesis’s distress sharpened with the collapse of FTX. Prior to that, the lender had loaned billions to failed companies, including a $2.4B loan to Three Arrows Capital.

Titan’s Takeaway: Genesis, now in the midst of a $1B emergency funding search, plays a key role as a massive lending desk tied to nearly all yield-bearing products in the industry. A curtain close could spell more turmoil for major digital-asset players as they try to avoid contagion.

Main contributor: Rosen Traykov


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