Macauley Peterson

Back in November, Swiss consulting firm Storm Partners pitched its legal and compliance services to the 1inch DAO. The DAO, which governs the 1inch network, is known primarily for its decentralized exchange (DEX) aggregator.



The idea was for the DAO to have legal advice on call to defend its rights and interests, and to start putting in place a structure to protect its members from personal liability.



The <a href="https://gov.1inch.io/discussion/14065-1ip49-legal-regulatory-compliance-services-to-defend-the-rights-and-interests-of-1inch-dao">proposal</a> moved to an on-chain vote last week. It was overwhelmingly approved and finally executed on Wednesday, with a retainer fee of $50,000 <a href="https://etherscan.io/tx/0xa1bb4f4aef3dee270b6a5d484bbb31fedf818045e72b49f9eb1ed230973d8a65">paid</a> in USDC.



There aren’t many — if any — precedents for a <a href="https://blockworks.co/tag/daos">DAO</a> voting to hire legal representation. The closest analogue is BarnBridge DAO, which was forced to shut down by the US Securities and Exchange Commission in July.



Read more: <a href="https://blockworks.co/news/barnbridge-sec-dao">‘SEC investigation’ leads Ethereum DeFi protocol BarnBridge to order halt</a>



The BarnBridge protocol was designed to mitigate risks associated with yield farming and interest rate volatility in the crypto market. Its yield-bearing vaults operated on the principle of &#8220;tranching,&#8221; which is a method borrowed from traditional finance.



The BarnBridge “Operating Team” had the DAO effectively rubber-stamp a decision already made to engage a law firm to defend its members.



Through a settlement <a href="https://www.sec.gov/files/litigation/admin/2023/33-11262.pdf">released</a> in late December, the founders of BarnBridge agreed that “BarnBridge DAO offered and sold to the public structured crypto asset securities, known as SMART Yield bonds (“SMART Yield”), in unregistered transactions.”



The DAO was ordered to pay $1.46 million in disgorgement to the US Treasury. Co-founder Tyler Ward <a href="https://x.com/lordtylerward/status/1738976818412093929">described</a> the outcome as getting “nuked.”



With a security-like product and a governance token called BOND, it is perhaps unsurprising that BarnBridge attracted the ire of regulators.&nbsp;



The <a href="https://blockworks.co/tag/sec">SEC</a> order states that the BarnBridge was “purportedly eliminating the need for intermediaries associated with traditional finance, such as banks and broker-dealers.”



But there’s nothing purported about it. The protocol worked as described, and it was an innovative application of blockchain technology. One can well imagine an alternate universe <a href="https://blockworks.co/news/coinfund-president-crypto-regulation">in which some “safe harbor”</a> or sandbox-like approach from regulators would allow the protocol to develop and flourish, before spending time filing paperwork.



The SEC claims that the SMART Yield investment pools themselves were “unregistered investment companies,” and by settling, they were never forced to <a href="https://x.com/BrandonFerrick/status/1738282054347858247?s=20">prove</a> that claim in court.



Swiss-based Storm Partners calls its arrangement with 1inch “much more innovative,” since the firm made its own governance proposal with specific plans in mind.



Read more: <a href="https://blockworks.co/news/dao-governance-experiments-2024">3 DAO governance trends to watch in 2024</a>



“The DAO has chosen us and conferred upon us a Power of Attorney to legally represent the DAO before third parties,” a Storm Partners spokesperson told Blockworks.



The move “represents a bridge between the decentralized ethos of a <a href="https://blockworks.co/tag/web3">Web3</a> DAO and the legal and regulatory stability provided by a centralized legal counsel,” the firm said in a statement following the DAO vote.



Nicola Massella, legal and compliance director at Storm Partners, called the engagement “a significant step forward in the journey towards legal recognition of decentralized organizations.”



Given the hourly fees involved — paid in Swiss Francs — the 1inch DAO can expect somewhere around 200 hours of legal advice for their retainer.



Storm Partners is required to deliver a quarterly report enumerating its activities on behalf of the DAO.



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1inch DAO lawyers up to shield members from liability

Morgan Chittum

<div id="highlights-block_623a5bb110d39" class="highlights">
 <ul>
 <li>Nexo’s investment team has already backed BCB Group, BlockFills, The TIE and 1inch</li>
 <li>Through a partnership with hedge fund Three Arrows Capital, Nexo announced an NFT-backed lending service in December</li>
 </ul>
 
</div>



Crypto platform <a href="https://nexo.io" target="_blank" rel="noreferrer noopener">Nexo</a> has launched a $150 million in-house Web3 investment fund, Blockworks has learned.



The company’s venture capital investment arm, Nexo Ventures, plans to deploy capital into sectors including blockchain-based gaming, decentralized finance (DeFi) and NFTs.



“It went from a &#8216;side hustle&#8217; of the corporate finance team last summer to a full-on strategic part of the business by January,” Troy Gravitt, Nexo’s head of communications, told Blockworks.



Tatiana Metodieva, the venture arm’s head of corporate finance and investments, said the fund will “drive the continued adoption of digital assets and the expansion of the Web3 ecosystem.”



“Also, our investment value proposition differs from most traditional investment funds,” Metodieva, a chartered financial analyst, said. “We’re native to and have a deep understanding of the digital asset industry and technology. We prioritize strategic investments and aim to integrate innovative solutions into Nexo’s product ecosystem and across our global market footprint.“



Leading up to the fund’s launch, the venture unit invested in 1inch, BCB Group, BlockFills, Bware Labs, Interlay, Mizar, Qredo, Rain, Texture Capital, The TIE and Yield Protocol.



Near-term deal flow for the fund, a source familiar with the matter said, will “easily double the number and size of its recent investments.”



In December, Nexo <a href="https://cms.blockworks.co/nexo-to-launch-nft-backed-lending-bitwise-debuts-an-nft-index-fund/" target="_blank" rel="noreferrer noopener">rolled out</a> its NFT-backed lending desk with Singapore digital asset hedge fund Three Arrows Capital. The service allows clients to use NFTs (non-fungible tokens), such as CryptoPunks and Bored Apes, as collateral for loans.



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Nexo To Launch $150M Web3 Investment Fund

<div id="highlights-block_617930d35ef4a" class="highlights">
 <ul>
 <li>$500 million in liquidations on crypto derivatives, though DeFi blue chips AAVE and 1INCH buck the trend with double-digit gains</li>
 <li>Eth 2.0’s &#8216;Beacon Chain&#8217; completed its &#8216;Altair&#8217; hard fork shortly before 7:00 am ET.</li>
 </ul>
 
</div>



Bitcoin and the broader digital asset market fell sharply during early morning hours in New York, with BTC notching a roughly 5% decline and ETH tumbling over 8% in the space of a few hours, driven by cascading liquidations of traders using dangerously high levels of leverage.



In recent days both the amount of leverage and the open interest in crypto derivatives markets have been climbing to levels not seen since the September 7, 2021 mini-crash. This has been a frequent theme of the current bull market rise, and the third such drawdown in the past week alone.



Ether’s drop was more pronounced, though also similar to an 8% drop <a href="https://cms.blockworks.co/ether-follows-bitcoin-to-all-time-high-but-meets-extreme-volatility/" target="_blank" rel="noreferrer noopener">seen on October 21</a>, after the second largest cryptocurrency registered an all-time high.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Bitcoin suddenly fell by 4.5%, falling below 59,000, Ethereum fell below 4,000, and the amount of liquidation in one hour has exceeded 500 million U.S. dollars.&mdash; Wu Blockchain (@WuBlockchain) <a href="https://twitter.com/WuBlockchain/status/1453276571997978630?ref_src=twsrc%5Etfw">October 27, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Someone got hit hard on ETH on Bitfinex. Liquidated for ~35k ETH ($130m) Cant&#39; remember the last time I saw something of this size get liq&#39;d on finex. Insane. <a href="https://t.co/RtxEbK5t51">pic.twitter.com/RtxEbK5t51</a>&mdash; Hsaka (@HsakaTrades) <a href="https://twitter.com/HsakaTrades/status/1453277837897699335?ref_src=twsrc%5Etfw">October 27, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<h3 class="wp-block-heading">Fundamental moves</h3>



Ethereum’s ‘Beacon Chain’ — also known as Eth 2.0 — which will be merged with the current Ethereum mainnet in 2022, underwent a scheduled upgrade at approximately 7:00 am ET. Dubbed Altair — after the twelfth brightest star in the night sky — it’s “the first major network upgrade that will have an exact rollout time,” according to <a href="https://ethereum.org/en/history/" target="_blank" rel="noreferrer noopener">ethereum.org</a>, due to the Proof-of-Stake nature of the new chain&#8217;s consensus mechanism.



The market correction preceded the upgrade, but appears unrelated. There is now over 8 million ETH&nbsp; — still $32 billion in dollar terms, even after Wednesday&#8217;s drop — <a href="https://beaconcha.in/" target="_blank" rel="noreferrer noopener">staked in the Beacon Chain</a>.



Bitcoin has seen a slew of positive fundamental news in recent days, with additional investment avenues in traditional finance being added by <a href="https://cms.blockworks.co/wisdomtree-adds-bitcoin-futures-to-existing-etf/" target="_blank" rel="noreferrer noopener">Wisdom Tree</a> and <a href="https://cms.blockworks.co/valkyrie-files-for-leveraged-bitcoin-futures-etf/" target="_blank" rel="noreferrer noopener">Valkyrie</a>, following a wildly successful launch of the <a href="https://cms.blockworks.co/bito-on-track-to-be-first-fund-in-history-to-hit-1b-in-aum-in-two-days/" target="_blank" rel="noreferrer noopener">first futures-based ETF from ProShares</a>.



“On the heels of the first bitcoin futures ETF being approved last week, many now believe that an ether futures ETF will soon be approved as well,&#8221; wrote Noelle Acheson, Head of Market Insights at Genesis, in an email to Blockworks. &#8220;We are seeing these assumptions drive interest on our desk and the overall price of ether over the past seven days, evidenced in ETH’s outperformance over BTC.&#8221;



But the prospect of an ether ETF is unlikely in the near term, Acheson notes, due to a relative lack of liquidity in the ether futures market on the CME, and the need for greater regulatory certainty, chiefly from the US SEC, as to its potential status as a security.



<h3 class="wp-block-heading">Outliers: AAVE and 1INCH</h3>



New listings on centralized exchanges still can have a strong influence on the price of even well-established DeFi names. The 35% rise in money-market protocol AAVE and and more than 80% for decentralized exchange 1INCH is an apparent consequence of <a href="https://upbit.com/service_center/notice?id=2239&amp;__cf_chl_jschl_tk__=pmd_guFTWzK2W_UTojJrl9oCAFofrIEo5XDft8DTQvUCmEg-1635331274-0-gqNtZGzNAiWjcnBszQil" target="_blank" rel="noreferrer noopener">new listings announced</a> against BTC trading pairs by Korean exchange Upbit.



Both names subsequently gave back about half their gains along with the larger market decline.



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/LzNj4rIFAIxxjUcdqIwDBG7X-2hz4FgNG1wELCO9JRF2QCNC7s3IznDC1ax-joEMIXI-l_mJ8MGweakoyRreUqf9E3pdnJCK5y4sSaS9NWEG3ekqEQD85D-yJhVZmS3YSu9_Lx9d" alt=""/></figure>



Bitcoin CME Futures have been trending down since their peak seven days ago at $67,680. Nasdaq and S&amp;P 500 futures are trading flat, falling about -0.3% during the crypto market skid before bouncing.



This story was updated on October 27 at 8:27 am ET.