Just a few years ago, Shrapnel was expected to become the Call of Duty of crypto. It promised a vivid, sci-fi world — one I saw firsthand at the 2023 Game Developers Conference in San Francisco.

I got to play a very early demo of the game, where players on a small map had to locate weapons, take each other down and extract mineral-rich asteroid bits known as Shrapnel from the map. Yes, the game was laggy, had bugs and needed technical optimization. But back then, it truly felt like the beginning of an “AAA” gaming experience.

Shrapnel had elements of Escape From Tarkov and Apex Legends — and was planning an optional “GameBridge” NFT ecosystem for players. Gunzilla Games’ Off The Grid, another extraction shooter with its own token using Avalanche, was at the time also comparable to Shrapnel.

In October 2023, Shrapnel raised $20 million in Series A funding in a round led by Polychain Capital. Griffin Gaming Partners, Franklin Templeton, Brevan Howard Digital, IOSG Ventures and Tess Ventures also invested.

At the time, Neon Machine had about 70 to 100 employees in total, with additional labor outsourced from Sperasoft and the underlying core of the game coming from IronBelly Studios, three sources familiar with Neon Machine’s business confirmed to Blockworks.

Shrapnel was previously slated to launch in 2024. Where is it now?

According to a Blockworks investigation, it’s millions of dollars in the red and with very few employees left after multiple rounds of layoffs.

Financial troubles

Multiple sources familiar with Shrapnel’s financials told Blockworks that Neon Machine has a slew of unpaid debts, owing millions to external vendors. The studio was trying to get its monthly burn rate or costs to under a million, but some months had a burn of $2 million to $3.5 million a month, sources — who requested anonymity due to the non-public nature of the company’s financials — said.

The company has had a total operating expenses burn of $86.9 million since “the founding of the company,” according to an internal document viewed by Blockworks.

Two sources called Neon Machine a “toxic, failing startup” and allege that the top executives who started the studio failed to develop a clear financial plan. They claim the studio is out of cash and that an expected early 2025 round of fresh funding that had been expected to close in February has failed.

When asked about Shrapnel’s work environment, Neon Machine told Blockworks via email: “The work environment at Shrapnel fosters a culture of collaboration and innovation among individuals who have a mutual respect for each other’s talents and contributions. The employees at Shrapnel continue to drive towards success for the vision laid out when the company was founded.”

An attempt to obtain funds may still be in the works. In an email dated April 2, Neon Machine CEO Kenneth Rosman told Blockworks: “We are in the late stages of a fundraising process which has a lot of momentum, and as a result requires us to be heads down for the next few weeks.” The company declined an interview but responded to questions via email.

Rosman became Neon Machine’s CEO in December 2024.

Financial documents reviewed by Blockworks suggest that Neon Machine saw a net loss of $11.4 million in 2024. Last year, it saw about $21.7 million in services revenue, but spent roughly $33 million in “operating expense burn.” 2023 was its best year in terms of revenue, but it did not go into the black that year, either. According to the documents, the firm has lost money every year since 2021.

Another Neon Machine financial document included a company prediction that it would operate at a cash-on-hand deficit beginning in March 2025, “assuming no additional cash receipts” and have a deficit of over $13.5 million by the end of Q4 this year.

Those factors may be the main reasons why the studio has conducted multiple rounds of layoffs.

Neon Machine declined to comment on the company’s specific financials including its net losses, expenses, profits, burn rate and whether it currently owes money to external vendors.

“As a privately held company, we do not disclose financial details—but we’re now in the strongest position we’ve been to date. With a clear path forward, we’re fully focused on the launch of SHRAPNEL and energized by the progress we’re making,” the company wrote.

“We’re now in the best shape we’ve been [in],” Rosman assured me via email.

Shrapnel has conducted at least three rounds of layoffs, with one occurring six months ago and the latest occurring in early March 2025, several sources told Blockworks. Staff were asked to remain quiet about the layoffs to avoid attracting attention to the company, according to the sources. But the few ex-employees who did post about leaving the company were neutral to positive in their public posts about their time there.

Neon Machine had closer to 100 employees at its highest headcount, a source familiar with the company told Blockworks.

By the end of Q1 2024, Neon Machine had 72 employees, 39 of which were working on Shrapnel, according to an internal document reviewed by Blockworks and multiple sources.

But by the end of last year, there were a total of 32 employees working at Neon Machine — just 20 of them working on Shrapnel, the internal document and sources said.

Sources also claim that roughly a dozen full-time staff remain in total across the company’s divisions, with very few actually developing Shrapnel itself.

In response to a question about the layoffs, Neon Machine wrote: “Our team is intentionally lean and focused as we enter the most critical phase of bringing SHRAPNEL to market this year. While our headcount is currently smaller than previously reported, this is the result of strategic adjustments to ensure every resource is aligned toward the successful development and launch of the game. In earlier phases, we explored additional growth opportunities in areas like multimedia and infrastructure. Now, as we move full speed toward launch, we will operate with a core team of full-time employees, supported by world-class co-development partners who share our vision.”

When asked specifically how many in-house engineers are working on Shrapnel right now, Neon Machine said: “Our team structure reflects what’s proven to work best for high-growth gaming startups: lean, focused, and built for agility. We prioritize hiring key department leads in-house to maintain strong alignment and ownership, while strategically outsourcing to stay nimble and efficient. We’re planning to expand in the coming months with a few key hires to support our next stage of growth.”

Before the latest round of layoffs in March 2025, employees making more than $100,000 annually were told their salaries would be cut by roughly 20%, two sources said. Staff were asked to sign documents agreeing to those terms in February 2025, according to a copy of one of the agreements viewed by Blockworks.

“Like many startups, we’ve occasionally made short-term adjustments to preserve momentum and stability. As part of our effort to extend runway and stay focused on delivering SHRAPNEL, we implemented a temporary, voluntary salary adjustment for higher-earning team members. This proactive decision was made to support the long-term health of the studio while we explored funding opportunities,” Neon Machine said.

Neon Machine is no longer using its office space at Thinkspace in Seattle as of the end of last month. A Thinkspace spokesperson confirmed to Blockworks that the game studio had moved out.

“Shrapnel will launch as a free-to-play, always-on game in 2025,” the Shrapnel team posted on its Medium blog in January 2025. The game had previously been slated for a 2024 release.

But three sources familiar with the studio’s financials said they do not believe Shrapnel will launch worldwide this year — if ever — because the studio behind it has allegedly run out of cash and the game is not yet complete.

“SHRAPNEL is planned for a simultaneous worldwide launch. Our goal is to launch before the end of 2025,” Neon Machine told Blockworks.

The China pitch

Neon Machine is planning to launch Shrapnel in China on the country’s real-world assets (RWA) Trusted Copyright Chain, entering a partnership with the Chinese government. Neon Machine announced the news on April 1 in a press release, confirming it was not an April Fool’s joke.

The RWA chain is “where digital assets and IP rights are officially certified by government administrative bodies to enable true digital ownership for all citizens,” the release states.

According to a source, internal company documentation explained that the move is a “For China, By China” pitch. Neon Machine is working with a handful of Chinese entities on the Chinese version of the game, including one called ZenHive, which was not mentioned in the press release.

Neon Machine told Blockworks the deal with China does not mean the studio is selling the game to the Chinese government.

“Neon Machine remains independent, and the launch of SHRAPNEL remains global. The partnership with China presents the opportunity for SHRAPNEL to attract a large user base from the region with the support and promotion of the government and local partners. SHRAPNEL is creating custom content (in-game assets such as Characters and Skins) for China which [sic] with a planned release in June, and the partnership will have a revenue share,” the company said.

A confidential corporate document details the “responsibilities” for “Neon Machine (USA)” and the following entities: “Zenhive (China)” and “Argon (Panama).”

In the deal, ZenHive is supposedly responsible for overseeing Shrapnel’s “marketing and sales funnel” in China. The entity will collect “bank gross sales revenue,” according to the internal document.

Another entity, dubbed Argon, is based in Panama and is to pay Neon Machine’s “service invoices,” among other duties, including transferring taxes owed to China collected from the international marketplace to China.

According to Neon Machine, Argon, or the Argon Protocol Foundation, is “the Foundation that is developing the Shrap Protocol and SHRAP Token, and has engaged Neon to help develop, market, and maintain the protocol and token.”

ZenHive is also to “hold Argon’s rev share, pay Argon’s China co-dev partners, pay China taxes on gross sales,” and “transfer Argon’s rev share upon Argon invoice,” according to the document.

Neon Machine is planning to hire co-development partners in China for its game launcher and for its “content” to help it develop Shrapnel, the document claims. Neon Machine’s job in the deal would be to “source and manage” these external vendors. Neon Machine itself is expected to deliver “Access Pack Concept Art and Codes” to ZenHive and deliver game assets for China to China pack buyers/wallets.”

The public press release announcing the news states that the “Shrapnel team participated in a forum on ‘Web3 Gaming and International Digital Copyright Collaboration’ in Beijing with attendees including Wang Yefei, the Chairman of the Capital Copyright Association” recently.

“The Beijing Copyright Bureau is a working department of Beijing Municipal People’s Government,” Neon Machine said when asked about the Capital Copyright Association.

Shrapnel is also in discussions with the Lingjing People’s Game Lab regarding the game’s digital assets, according to a Medium post published on Tuesday. Lingjing Game Labs is a digital subsidiary of the Chinese state-run newspaper People’s Daily, which is operated by the Central Committee of the Chinese Communist Party.

The deal with China is a last-ditch effort to save the company, three sources familiar with the matter claimed. Two also noted the game’s team had begun designing those game assets for the Chinese market last year to help pitch the idea of a sale before the latest round of layoffs.

Shrapnel’s X account responded to my post regarding the focus on China and away from the US market with: “We are focused on global markets, including the US market.”

We are focused on global markets including the US market. Please reach out to us in a DM for any questions.
— SHRAPNEL 🔺 (@playSHRAPNEL) April 1, 2025

Because China has restrictions on crypto, however — as well as on what types of violence can be depicted and the types of characters that can be played — the game will be “localized” for the Chinese market, per the press release.

China also has strict rules on the amount of time minors can spend playing video games. In 2021, it established a rule limiting video game play time to one hour a day on Fridays, weekends and public holidays.

“We cannot comment or speculate on the Chinese government’s involvement in crypto or gaming. Any game, regardless of technology, undergoes review by the Chinese regulatory authorities to ensure compliance. The use of a specific technology does not impact content regulations; we have no plans to alter the gameplay for any specific geography. As in the case of China, we will offer exciting and exclusive content (in-game assets, collaborations) for players in the region,” Neon Machine told Blockworks.

Token troubles

While Shrapnel’s finances have deteriorated, its token has fared far worse. SHRAP, the game’s Avalanche C-chain based ERC-20 asset, is down roughly 98% since CoinGecko began tracking it in November 2023. It peaked at around $0.43 and now trades at just $0.0066.

Three billion SHRAP were generated on April 29, 2023, according to the Shrapnel website.

At this point, it’s unclear whether the token will ever be usable in the game, given the deal to build Shrapnel on China’s RWA blockchain. However, an Ava Labs spokesperson confirmed to Blockworks that Neon Machine still plans to continue development on its Avalanche L1.

SHRAP selloff

A wallet with an ENS name donnorbury.eth, which sources told Blockworks belongs to Shrapnel co-founder and ex-studio head Don Norbury, has sold approximately $672,000 worth of SHRAP since September. The sales occurred via token swaps into USDC ($266,954) and AVAX ($404,841) via MetaMask, according to public blockchain data compiled by Blockworks Research.

Norbury’s LinkedIn identifies him as the chief technology officer of Shrapnel since December 2024.

Roughly $200,000 of that was sold in October 2024, and another $200,000 worth of SHRAP was sold a month later in November. That wallet has ultimately sold thousands of dollars worth of SHRAP every month since September 2024, most recently selling about $25,000 worth in March and nearly $4,000 worth in the past week.

In 2024, the team revised its token unlock schedule, according to a March 2024 Medium post, which spread out SHRAP unlock more over time.

Tokens began to be unlocked for the team, advisors, seed token holders and strategic token holders on April 29, 2024 — 12 months after the token was launched.

“While the community reward pool emissions and ecosystem fund unlocks are not changing, the number of remaining tokens unlocking in April 2024 is reduced by nearly 75%,” the Shrapnel team wrote in the Medium post. “The non-linear unlock divides the total unlock period of each pool into four epochs, beginning with a lower unlock rate, and accelerating with an increasing user base and increasing SHRAP utility. Existing unlocked SHRAP tokens remain unlocked.”

*Image from the Shrapnel* *white paper* *cited in the Medium post*

Based on Blockworks’ analysis, it is most likely that the SHRAP tokens sold by the Norbury address had been received from vesting and had not been paid for on the open market.

Norbury did not respond to Blockworks’ multiple requests for comment by press time.

Lengthy legal battles

Shrapnel has also been the center of a multi-year lawsuit that began in 2023 over company funds involving its co-founders.

4D Factory, a controlling shareholder in Shrapnel, believed it was inadequately compensated by Neon Machine. But Neon Machine believed at the time that 4D was “raiding or attempting to raid” its coffers.

Neon Machine has since told media outlets that the lawsuit has been settled. Details of the settlement have not previously been reported.

On Feb. 14, a legal filing with the Southern District of New York proposed a settlement: “As a result of the settlement and the dismissal of all claims with prejudice, 4D also retains ownership of its 6 million shares of Neon Machine common stock.”

The settlement, the details of which 4D’s attorneys confirmed to Blockworks, further noted that Neon Machine is expected to pay 4D $4.25 million in cash over the next 48 months. 4D is also expected to receive 150 million SHRAP in accordance with a vesting schedule.

150 million SHRAP is equal to about $767,500 at current prices, according to data from CoinGecko. ByBit is the largest market for SHRAP trading as of press time, with around $43,000 in daily trading volume. CoinGecko also puts the SHRAP circulating supply at about 40% of the total, with about 60% of tokens still unvested. This market data suggests that SHRAP is illiquid on public markets, making it difficult to exit in size due to potential slippage.

Regarding the lawsuit’s settlement, Neon Machine told Blockworks: “We can confirm that it has since been approved by the court.”

Blockworks reached out to both parties’ attorneys for comment. Attorneys for 4D factory also confirmed to Blockworks that the lawsuit has been settled and provided a statement from 4D’s founder, Cort Javarone.

“4D Factory supported Shrapnel before it was even born, and we believe in it more than ever today,” Javarone told Blockworks in the statement. “We look forward to the game launching and exceeding everyone’s highest expectations.”

Get the news in your inbox. Explore Blockworks newsletters:

Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
Empire: Start your morning with the top news and analysis to inform your day in crypto.
Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
The Drop: For crypto collectors and traders, covering apps, games, memes and more.
Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.