Katherine Ross

Arca and BlockTower are merging in an all-equity deal, the companies announced last week.&nbsp;



Arca CEO Rayne Steinberg talked to Blockworks about the merger, timing and what this next cycle could look like.&nbsp;



The two had been in talks to merge for a little over two months, Steinberg said. They’d always been close, but the merger just “made so much sense” after talks ramped up.



Aside from BlockTower’s venture team, which will be spun out, <a href="https://blockworks.co/tag/arca">Arca</a> and BlockTower plan to retain all their talent under one umbrella. Steinberg will lead the new company, with Jeff Dorman staying on as chief investment officer. Ari Paul, CIO and founder of BlockTower, will be moving to an advisory role, though Steinberg believes he’ll be “very involved.”



Steinberg pointed out that the two had to move quickly due to “crypto years,” which pass much faster than in other sectors. The deal is expected to close by the end of this year, and Steinberg said he couldn’t even imagine what crypto would look like if they waited another whole year to close.&nbsp;



Read more: <a href="https://blockworks.co/news/m-a-deals-shifting-tide">Latest crypto M&amp;A deals signal ‘the tide is shifting’</a>



The goal is for the new entity to become a “one-stop shop for sophisticated investors.”



And while the overall political environment wasn’t a huge factor, it’s definitely going to benefit the new company going forward.&nbsp;



“We see this as a huge white space for the token market,” Steinberg told me. Previously, tokens had been “handicapped” because they haven’t been able to offer elements such as fee switches. If the regulation or enforcement actions around tokens loosen, then Steinberg is confident that he’s bringing the best team to the table.&nbsp;



“It&#8217;s not just about saying that there shouldn&#8217;t be regulations or things like that, but sensible regulations that make sense,” he said.



Read more: <a href="https://blockworks.co/news/trump-lenient-crypto-regulation">Traders are banking on Trump’s pro-crypto action</a>



It’s not just tokens that are going to benefit from the new environment. Steinberg said he also remains bullish on activists investing in DAOs.&nbsp;



The “inefficiencies in the space” have not allowed it to “mature, in having people that drive good governance thinking about outcomes for token holders,” he said.&nbsp;



“I&#8217;m not knocking any regulatory regime or thinking about that. But just when you have an environment where you&#8217;ve kind of disallowed any productive use of tokens, from fee switches to utility or things like that…contrary to what you would probably want, you create an environment where only things like memecoins have any real traction, because they literally, by definition, cannot offer anything of a tangible value.”



Arca doesn’t have any plans for “specific lobbying,” Steinberg said. But the new company will continue to be a “steward” for the industry.



With more clarity, he believes, we’ll see both traditional and activist investors get more involved which, in turn, makes him more bullish. This could also lead to further consolidation down the line as crypto readjusts in the next cycle.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Arca to create ‘one-stop shop’ for investors after BlockTower merger

James Cirrone

Former OKX brand and partnerships head Rachel Conlan is jumping ship to Binance. Given the <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">SEC lawsuit against the crypto exchange</a>, and the more than $2 billion in assets <a href="https://defillama.com/cexs">pulled</a> from the platform within the last seven days, Conlan is likely going to have her work cut out for her.&nbsp;



Conlan’s hiring as Binance’s vice president of global marketing came the same day as the <a href="https://blockworks.co/news/sec-allegations-against-binance">SEC’s suit against the exchange</a>.



According to a <a href="https://www.binance.com/en/blog/leadership/binance-hires-veteran-marketing-exec-rachel-conlan-as-vp-of-global-marketing-5745464614732405001">statement</a> from Binance, Conlan will be responsible for managing “regional and global marketing teams” to “help reinforce and expand Binance’s position as a trusted industry leader in the crypto space.”



Establishing trust could become an even more important priority for Conlan and her team, considering <a href="https://blockworks.co/news/binance-execs-unlicensed-securities-exchange">the wealth of Binance internal communications</a> the SEC blasted out to the world in their 136-page lawsuit.



For instance, the SEC claimed that a Binance chief compliance officer said in 2018 that “We are operating as a fking unlicensed securities exchange in the USA bro” and that “we do not want [Binance].com to be regulated ever.”



Besides dealing with the inevitable fallout of encroaching regulators, Conlan will also be tasked with overseeing and growing Binance’s collaborations with brands and celebrities, including Cristiano Ronaldo and The Weeknd.



She’ll report to Binance’s co-founder and chief marketing officer, Yi He, who spoke on her hiring in a statement: “With Rachel&#8217;s extensive experience, she will help propel the industry forward, introducing more people to blockchain, familiarizing them with Binance, and collectively building this still very early-stage industry.&#8221;



<h2 class="wp-block-heading">Circle and Kraken make big hires this week</h2>



USDC issuer Circle <a href="https://twitter.com/jerallaire/status/1666774116567773185">added</a> Heath Tarbert to its ranks as chief legal officer and head of corporate affairs. He’ll start on July 1.&nbsp;



Tarbert’s hiring is notable because of his extensive experience working in the US government, especially at a time when regulatory authorities are cracking down hard on crypto.&nbsp;



Arguably his most applicable role was as chair of the CFTC, a post he served from July 2019 to January 2021. Prior to that, Tarbert was high up in the US Treasury.&nbsp;



He’s also served high profile politicians and judges. He was former President George W. Bush’s associate counsel in the final six months of his tenure in the White House, and immediately before that, he was a law clerk to Associate Supreme Court Justice Clarence Thomas for a little over a year.



Jeremy Allaire, CEO of Circle, said that Tarbert will make a significant addition to the Circle team as it continues to pursue a growth strategy.



“As we continue building a bridge between traditional finance and Web3, Heath’s perspective, legal acumen and global regulatory experience will help us advance the utility value of USDC worldwide,” Allaire said in a <a href="https://www.circle.com/en/pressroom/circle-names-heath-tarbert-chief-legal-officer-head-of-corporate-affairs">statement</a>.



Blockworks reported Friday on <a href="https://blockworks.co/news/circles-public-listing-plans-undeterred">Circle’s plans to go public</a>, which they say are undeterred by the SEC’s recent enforcement actions.



Separately, Kraken <a href="https://blog.kraken.com/meet-krakens-new-chief-technology-officer-vishnu-patankar">appointed</a> tech veteran Vishnu Patankar as chief technology officer. Patankar’s last gig was chief technology officer at StockX, a job he’s held since 2020.&nbsp;



His experience as a tech executive and expert stretches back to 1998 when he was hired at Intel as a component design engineer. After that, he spent six years at Microsoft, then jumped ship to Amazon, where he stayed for 10 years in various roles.&nbsp;



Kraken CEO David Ripley, who took the helm at the crypto exchange in late April this year, said Patankar is a leader in the field that is “well equipped to build and optimize Kraken’s technology.”



“He is a seasoned executive with deep expertise across all aspects of product development and tech leadership. He has built and led large, globally distributed engineering teams at some of the most innovative companies,” Ripley said.



<h2 class="wp-block-heading">Other notable hires</h2>



<ul class="wp-block-list">
<li>GameStop <a href="https://news.gamestop.com/news-releases/news-release-details/gamestop-announces-election-ryan-cohen-executive-chairman">tapped</a> Ryan Cohen to be executive chair of the board, effective immediately.</li>



<li>Crypto accounting firm TaxBit <a href="https://www.forbes.com/sites/digital-assets/2023/06/08/taxbit-ceo-austin-woodword-steps-down-coo-lindsey-argalas-tapped-as-successor/?sh=52b578304a74">promoted</a> Chief Operating Officer Lindsey Argalas to chief executive, replacing Austin Woodward in the head role. Woodward will become chair of the board.</li>



<li>Tegan Kline has <a href="https://www.theblock.co/post/233809/the-graph-creator-edge-node-taps-new-ceo-tegan-kline-as-growth-becomes-top-priority?utm_source=news.xml&amp;utm_medium=rss">become</a> the CEO of Edge &amp; Node, one of the teams building The Graph protocol.</li>



<li>Crypto hedge fund Arca has laid off 30% of its staff, a move it chalked up to an “extended bear market and uncertain regulatory environment,” according to a statement Arca provided to Blockworks.</li>



<li>Bitdeer, a crypto mining platform, hired Haris Basit as its chief strategy officer.</li>
</ul>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Crypto hiring: Binance, Circle make key hires amid SEC enforcement

Bessie Liu

In a recent blog post, cryptocurrency hedge fund Arca explained its perspective on the latest <a href="https://blockworks.co/news/aragon-dao-may-be-restructuring-to-get-ahead-of-swiss-regulations">Aragon DAO dispute.</a>&nbsp;



According to Arca, a proposal enabling token holders to oversee Aragon DAO’s treasury was proposed and passed through a governance vote last year. When the transitionary period arrived however, the Aragon team delayed the process by three months to May 2.



As the first transition transaction occurred, Aragon banned members on its Discord channel, claiming that this decision was due to a 51% attack by “Risk-Free Value (RFV) Raiders,” of which Arca was a part.



The Aragon Association <a href="https://twitter.com/AragonProject/status/1656742229153574916">claimed</a> that it had noticed a suspicious amount of activity on its Discord channel and a sudden increase in wANT supply (around 47%). Leading it to believe that it was under a coordinated attack.&nbsp;



“We believed that this group was planning a 51% attack. The first transfer of $300k was the first of a series of transfers. This forced the AA to take quick action and clarify its position towards this group,” the Aragon Association tweeted.



Aragon Association noted that these RFV raiders were also linked to the recent liquidation of RookDAO — where after the DAO was dissolved, token holders had benefited from its treasury which still remained.



Arca’s chief investment officer Jeff Dorman <a href="https://www.ar.ca/blog/dao-dilemmas-unraveling-aragons-governance-controversy">responded</a> to these allegations noting that “Arca has had no investments in Invictus, Rook, Rome, or Temple. Additionally, the Fei Labs team proposed the dissolution themselves, and the Rook team initially proposed the spin-off &#8216;Incubator DAO&#8217; themselves. These &#8216;RFV raiders&#8217; pushed for the best outcome for token holders in both situations.”



Dorman also noted that the “51% attack” narrative was incorrect as it had dutifully purchased ANT tokens through the open market and also encouraged other token holders to participate in governance through staking their tokens.



“Essentially, Arca and a few other ANT token holders walked into Aragon with a note that said, &#8216;We’re thinking about withdrawing $80,&#8217; and the Aragon bank teller responded by calling the police, stealing the money from the vault, lighting the bank on fire, and threatening to open a new bank in a new country that no original customers could access,” Dorman said.



In an earlier <a href="https://blog.aragon.org/aragon-repurposes-dao-to-ensure-treasury-serves-its-mission/">blog post</a>, Aragon Association noted that ANT is registered as a “utility token” in Switzerland it must not deviate from its “stated social purpose.”



To address <a href="https://blockworks.co/news/aragon-dao-may-be-restructuring-to-get-ahead-of-swiss-regulations">concerns</a> about the ANT token&#8217;s potential classification as a security and ensure the Aragon Association retains its non-profit status, the team temporarily rebranded the Aragon DAO to the Aragon Grants DAO. In a <a href="https://twitter.com/AragonProject/status/1656742212162539520">tweet</a>, they stated, &#8220;any more funds sent from the Association to the DAO are for builders,&#8221; making their message clear to the RFV Raiders.



“This was a mistake, we screwed up and we apologize,” the association said.



The Swiss-based association has since unbanned all accounts across different social platforms but notes that it would not “stand for hostile and coordinated attacks, particularly not ones that involve social engineering.”



Co-founder of Aragon, Luis Cuende, has since proposed a $30 million buyback proposal.&nbsp;



<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">$30M buyback proposal from the cofounder of <a href="https://twitter.com/AragonProject?ref_src=twsrc%5Etfw">@AragonProject</a> just dropped Looks like everyone was aligned from the start, the pre-emptive banning was a mistake Now lets let the community back into discord, forums, and twitter&#8230; discuss this thing, and vooote! <a href="https://t.co/lrO4UbAA4O">pic.twitter.com/lrO4UbAA4O</a>&mdash; DCF GOD (@dcfgod) <a href="https://twitter.com/dcfgod/status/1656353822569304064?ref_src=twsrc%5Etfw">May 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“I’m supportive of improving ANT&#8217;s fundamentals with whatever the broader community decides,” Cuende tweeted. “DAO buybacks, done on-chain and transparently can be powerful.”



Chelsea Kubo, the co-founder and chief operating officer of Koris, an infrastructure stack for decentralized autonomous companies, told Blockworks that the Aragon situation should not come as a surprise to teams hoping to build in Web3.



“Token-led DAOs, including and not limited to Aragon’s $ANT community, face the classic risk of a 51% attack, amongst other flaws within a plutocracy system,” Kubo said. “Plutocracy models are notoriously fallible and have led to DAO conflicts across all of our industry. Now, after the shakeup at Aragon, there might finally be a wake-up call for DAO innovators and builders to push for widespread changes.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Arca Offers Their 2 Cents on Aragon DAO Attack Allegations

Michael Bodley

The moat has been breached, and the sky is all but falling.



Even blue-chip crypto traders running serious institutional money have booked eye-popping losses in just weeks. For their investors, the full extent of the damage is still anyone’s guess&nbsp; — a seeming eternity after FTX’s <a href="https://blockworks.co/news/bankman-fried-underestimated-collapse" target="_blank" rel="noreferrer noopener">abrupt bankruptcy</a> — as investor relations professionals hide behind pending mark-to-market valuations for startup stakes and early-stage tokens.&nbsp;



And that’s not to mention the scores of asset managers who have battened down the hatches as they’ve tried to trade their way out of historic holes, before their monthly performance updates are due, any day now, to their limited partners, industry participants told Blockworks.



One institutional crypto fund allocator, who has written checks to more than a dozen such operations, said the abrupt radio silence has been all but “maddening” — drawing a direct parallel to TradFi traders running for any kind of cover during the 2008 financial crisis.



“We’re all in the dark,” the source said. “I gave you my money. Why are you not answering my calls?”&nbsp;



Not that they’ve all beat feet to desert islands with no cell service. Case in point: Multicoin Capital.&nbsp;



The veteran cryptoasset manager’s flagship liquid hedge fund <a href="https://blockworks.co/news/multicoin-lost-more-than-half-its-crypto-funds-capital-this-month-sources" target="_blank" rel="noreferrer noopener">plummeted 55% in approximately two weeks</a> in November. The firm’s investors, of course, were not pleased.&nbsp;



But three sources close to the firm told Blockworks they took some solace in the fact that Multicoin executives didn’t hem and haw on a recent call explaining what happened — and at least tried to walk them through why.



One of the sources provided a detailed account of the call, which was open exclusively to limited partners. A Multicoin spokesperson declined to comment.



“The market is down a lot this year,” an executive said on the call. “And we&#8217;re down more than that. There&#8217;s no sugarcoating that. Making matters worse, we got hit while [we were] down. We strongly and publicly endorsed [FTX Founder] Sam Bankman-Fried and FTX. And they turned out to be frauds.”



Indeed, Managing Partner Kyle Samani led the charge to back FTX US with an unspecified amount in January 2022, when he <a href="https://www.coindesk.com/business/2022/01/26/ftx-us-attains-8b-valuation-in-400m-fundraise-including-softbank-temasek-report/" target="_blank" rel="noreferrer noopener">told Coindesk</a> that the affiliate of FTX proper was “laying the groundwork to become the dominant trading platform in the United States for all things crypto.”&nbsp;



FTX US had raised $400 million at a valuation of $8 billion. Bankman-Fried, ironically, has <a href="https://blockworks.co/news/ftx-run-by-inexperienced-unsophisticated-traders-court-hears" target="_blank" rel="noreferrer noopener">recently scrambled</a> to come up with $8 billion to bail out his flailing businesses. Samani’s fund has also gone in alongside Bankman-Fried in <a href="https://blockworks.co/news/multicoin-capital-leads-60m-round-in-data-dao-delphia" target="_blank" rel="noreferrer noopener">backing</a> a number of startups, an indicator of the venture business more broadly, wherein portfolio managers typically rely on one another for deal flow and due diligence.&nbsp;



Multicoin execs — pointing out internal capital accounts for, collectively, the largest chunk of the flagship — said they had no intention of shuttering the vehicle or, worse, the firm. Nor would they entertain converting to a proprietary trading shop, an increasingly <a href="https://www.ai-cio.com/news/bluecrest-to-return-8b-become-family-office/" target="_blank" rel="noreferrer noopener">enticing route</a> for those with the stomach to place riskier wagers in a bid to print big profits from staggering market dislocations, especially arbitrage opportunities.&nbsp;



<a href="https://www.axios.com/2022/11/21/multicoin-lps-frustrated-solana-ftx-performance-tax" target="_blank" rel="noreferrer noopener">Axios</a>, <a href="https://www.theblock.co/post/184766/multicoin-capital-hit-by-ftx-collapse-with-10-of-its-funds-aum-stuck-on-the-exchange" target="_blank" rel="noreferrer noopener">The Block</a>, <a href="https://www.cnbc.com/2022/11/17/crypto-firm-multicoin-says-contagion-fallout-from-ftx-will-continue.html" target="_blank" rel="noreferrer noopener">CNBC</a> and <a href="https://fortune.com/2022/11/15/multicoin-capital-ftx-bankruptcy/" target="_blank" rel="noreferrer noopener">Fortune</a> have reported aspects of Multicoin’s recent dealings. This story contains unreported details and provides the first account of the firm’s investor call.&nbsp;



<h3 class="wp-block-heading">Due diligence can avert a disaster&nbsp;</h3>



Scheduling an impromptu mid-month call is easy when you’re crushing your benchmark and want to put uneasy, information-starved investors at ease. But precious few digital assets-focused hedge and venture capital firms have been in that fortunate position lately.&nbsp;



They’re facing, instead, the onerous, come-to-Jesus undertaking of owning up to many, many errors: disproportionately relying on FTX custody, employing far too much leverage and doubling down on bets — that would turn out to be disastrous — in round after round.&nbsp;



It doesn’t have to be this way, though.



It doesn’t, that is, if asset managers do their homework. If they establish ironclad due diligence standards, put in place appropriate risk parameters and stay in near-constant communication with their investors all the while, a due diligence professional told Blockworks.&nbsp;&nbsp;



And it needs to be communicated in writing, according to James Newman, co-founder of London-based perfORM Due Diligence.&nbsp;



The startup <a href="https://blockworks.co/news/crypto-due-diligence-startup-vying-to-bring-transparency-to-opaque-industry" target="_blank" rel="noreferrer noopener">specializes in deep dives</a> on digital asset buy-side players and their service providers. Newman declined to specifically discuss Multicoin, or perfORM customers, citing client confidentiality.



“So, it’s one thing, verbalizing it,” Newman said. “The next step is actually to write that down in a policy that is then made available to investors. So, that’s part of assuring investors that there is an actual procedure and policy in place.”&nbsp;



Simply putting all that in place to begin with isn’t enough, Newman said. There needs to be a real commitment to a schedule of conducting due diligence check-ins with counterparties, as well as communicating the results, and, especially, any material changes, to investors.&nbsp;



Multicoin competitor Arca, for one, has likewise recorded choppy performance in its flagship liquid hedge fund this year, despite not having significant FTX exposure. The firm, led by CEO Rayne Steinberg, has rejigged a number of internal guidelines since.&nbsp;



The market’s turn for the worse has forced Steinberg’s hand in <a href="https://blockworks.co/news/dodging-worst-of-ftx-arca-wont-stay-stagnant" target="_blank" rel="noreferrer noopener">shifting the capital-raising strategy</a> for the firm’s ongoing Series B raise — with capital already earmarked, in part, to bolster regulatory and compliance safeguards.&nbsp;



<h3 class="wp-block-heading">Are third-party crypto custodians still a necessary evil?</h3>



In Multicoin’s case, “what happened?” has been the question de jour.&nbsp;



The short version: Outstanding financial instruments under FTX custody and related derivatives, as well as a position in the startup Serum and a bullish thesis on SOL, were to blame. Both Serum and SOL, Solana’s native token, have lost immense value, partially because of their longtime ties to Bankman-Fried. The former has been placed in a side-pocket since the 2020 investment.&nbsp;



Traders are required to keep collateral with market-markers before open derivatives are settled.&nbsp;



On the custody front, Multicoin entrusted FTX with unspecified cash and FTT, the exchange’s native token that is also now underwater&nbsp; — plus relatively small sums of tokens only FTX US would custody, including Solana-based Mango (MNGO). Multicoin also has an equity stake in FTX, one which it will, presumably, have to write down, too — to zero.



The firm, as of mid-November, had successfully withdrawn about a quarter of its locked assets — resulting in a total fund exposure of about 10% — and had been planning to whip up a side-pocket to protect potential incoming limited partners.



Multicoin had one other main trading counterparty: the <a href="https://blockworks.co/news/binance-could-acquire-genesis-loan-book" target="_blank" rel="noreferrer noopener">now-defunct Genesis</a>. But its team “closed out that exposure immediately” after FTX stopped withdrawals. The firm also has exposure to Coinbase&#8217;s custodial solutions. It it, however, moving certain outstanding assets to non-custodial, multi-signature solutions.



With centralized custodians, as keepers of clients’ private keys, there’s always an element of risk, according to Nick Neuman, chief executive of Casa, which helps individuals and entities set up their own <a href="https://blockworks.co/news/jameson-lopp-doesnt-want-to-be-found" target="_blank" rel="noreferrer noopener">cold storage solutions</a>. Neuman declined to specifically discuss Multicoin or any Casa clients.&nbsp;



Complicating matters: It’s tricky for active crypto traders to rely much on cold storage, Neuman told Blockworks, because of the time and logistics involved in transferring assets in an alpha-driven game where mere milliseconds matter.



Relying on third-party custodians — however reputable — “inherently requires trust” in potential bad actors, Neuman told Blockworks, the “exact type of thing our industry is trying to eliminate.”&nbsp;



The Casa head said the problem calls for a “mix of solutions.”



“One thing I know is that we have seen repeatedly [&#8230;] in our industry, problems with bad actors — since the beginning, with Mount Gox [being the] earliest and largest,” he said.&nbsp;



<h3 class="wp-block-heading">Multicoin: What to do, what to do?</h3>



Multicoin is in the process of onboarding Anchorage as an additional custodian in an effort to reduce its counterparty exposures, one of the sources said. A spokesperson for Anchorage declined to comment.



Multicoin has one big, quick fix. The firm — in addition to conducting due diligence on a number of other potential custodians, as well as other types of service providers — said it has already moved to keep its assets on any exchange for no more than 48 hours at a time. A number of other high-profile competitors have historically entrusted tokens to counterparties on a near-indefinite basis.&nbsp;



Its traders are also in the process of reducing collateral it pledges to market-makers. The upside is that the move reduces the tail risk of another liquidity crunch. The downside is that it significantly increases the risk of margin calls. 



The “more tightly knit” the collateral, the firm said, the “greater the risk” of abrupt liquidation, adding that new mitigating risk controls are in the works. Some of those incoming, tightened controls have been about four months in the making. Multicoin is also implementing fresh restrictions on staking, aiming to minimize exposures of locked-up tokens “in order to maintain flexibility and optionality during times of crisis.”



At least one thing is clear: the toll nefarious actors have taken — and, by all appearances, are continuing to take — on all of crypto, is mounting. And it has real-world consequences for the investors who entrust their capital to the traders who increasingly encounter them.&nbsp;



The firm told limited-partners it was not yet “sure” how its administrators and auditors would value frozen assets under GAAP accounting standards.&nbsp;



“But in our view, they should be marked to zero,” an executive said. “There is some chance of a partial recovery. And, you know, it&#8217;s maybe a smaller, much smaller chance of a larger recovery. But we believe that the conservative thing to do is to value them at zero for the time being.&#8221;



Multicoin had $8.9 billion of gross assets under management as of year end 2021, the latest data available.&nbsp;



How much is left?



Updated Dec. 2, 2022 at 2:53 pm ET: Clarifies the process and rationale behind Multicoin&#8217;s move to reduce the collateral it posts with market-makers. 



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

OK, You Blew Up Your Crypto Fund. What Do You Tell Your LPs?

In a yo-yo of a year for digital asset investment managers, Arca has largely held its ground.&nbsp;&nbsp;



The hedge and venture fund firm, in fact, is in the middle of finalizing a Series B round, according to two sources familiar with the matter. Arca CEO Rayne Steinberg confirmed the fresh capital-raise in an interview with Blockworks, saying it ought to be finalized in the coming months.&nbsp;



That’s not to say it’s been a painless year for the Los Angeles-headquartered operation. There have been a number of headaches, from choppy returns to operational and fundraising pivots.&nbsp;



Case in point: Arca first started outreach for the Series B about a year ago — near the height of the bull market, long before digital assets <a href="https://www.coingecko.com/en/global-charts" target="_blank" rel="noreferrer noopener">lost</a> 70% of their collective market capitalization. 



The firm also booked significant losses in its flagship strategy earlier in 2022, when the top-heavy market’s bottom fell right out on the Terra ecosystem — following the de-pegging of Terra’s stablecoin, UST — as well as the rapid collapse of over-levered crypto lenders, including Celsius and Voyager.&nbsp;



Sources said Arca was hit with fairly minor redemptions. Its liquid products offer monthly subscriptions and redemptions. But savvy repositioning and open lines of communication to limited-partners appear to have prevented a more dire outcome. And, crucially, Arca’s <a href="https://blockworks.co/news/arca-and-deso-foundation-kick-off-new-defi-funds" target="_blank" rel="noreferrer noopener">funds</a> had minimal exposure to FTX, Steinberg said, though he declined to specify an exact figure.&nbsp;



“Our investment mandate is broad, and our buckets are also broad, so those changed in an environment where [assets have become] super-correlated to macro,” Steinberg said.&nbsp;



The Arca head, tasked with heading business development for the Series B, decided to wait it out. The new plan: rejigger classification of the capital— settling on compliance, infrastructure and staffing, in both the parent company and its affiliate startup innovation and advisory division, Arca Labs.



“The environment really changed with Luna and upended it and really changed the makeup of who was going to be in it,” Steinberg said.



Following its seed round, Arca <a href="https://www.prweb.com/releases/digital_asset_management_firm_arca_raises_10_million_in_series_a_funding/prweb17656592.htm" target="_blank" rel="noreferrer noopener">closed</a> a $10-million Series A in January 2021 led by RRE Ventures. The firm likewise then-declined to detail its valuation.



Navigating regulation&nbsp;&nbsp;



Regulators, the <a href="https://blockworks.co/news/sec-grayscale-exploring-bitcoin-trust-options" target="_blank" rel="noreferrer noopener">SEC</a> and the CFTC in <a href="https://blockworks.co/news/cftc-commissioner-ftx-crisis" target="_blank" rel="noreferrer noopener">particular</a>, have scrambled to get a handle on the swiftly changing developments, a push expected to intensify on the <a href="https://blockworks.co/news/new-crypto-friendly-politicians-are-headed-to-washington" target="_blank" rel="noreferrer noopener">outcome</a> of the US’ midterms.&nbsp;



Steinberg welcomes the <a href="https://blockworks.co/news/crypto-industry-must-report-bad-actors" target="_blank" rel="noreferrer noopener">scrutiny</a>. Amping up the financial watchdogs’ powers, while perhaps overdue, ought to weed out an assortment of digital asset bad actors, including fraudsters. New regulation, as well as the potential for <a href="https://blockworks.co/news/crypto-policy-proposals-ok-rep-says" target="_blank" rel="noreferrer noopener">congressional legislation</a>, would give a leg-up to asset managers — including Arca — with robust compliance structures and featuring executives who cut their teeth on Wall Street.&nbsp;



The institutional investment manager&nbsp; — whose limited-partners are predominantly the likes of endowments and pension plans — has historically sourced potential investors from what Steinberg dubbed “the gateway [to] traditional finance.” It’s also important for the startup’s partners to maintain their own distribution channels.



Despite a number of indicators that deep-pocketed TradFi investors are sitting out crypto’s latest volatile session — and some prominent figures, according to industry participants, are pulling out entirely — Steinberg said the vast majority of the Series B’s likely backers have not had much exposure to recent market conditions.&nbsp;



Fending off the bear market



The chief executive declined to disclose the specific investors with Series B commitments, or entities now in the midst of due diligence. But there is some crossover between Arca’s existing limited-partner roster, according to Steinberg, formerly WisdomTree Asset Management’s co-founder.



The Arca co-founder also declined to comment on how much capital the firm is targeting for the venture round, citing the fundraise still being in the works — and would not disclose an approximate new valuation under the same rationale.&nbsp;



Arca’s exact year-to-date showing for its main fund isn’t known, but one source said they were “far outside the norm,” which typically has a “healthy respect for risk.” The team’s portfolio managers clawed back a “good chunk” of those losses in the coming months — and then dipped again as markets were rattled by FTX’s bankruptcy.&nbsp;The fund outperformed spot bitcoin and ether from the start of November through last Friday, however.



The asset manager’s flagship fund employs a global macro approach, utilizing a bottom-up, fundamental technique — pioneered by TradFi stock-pickers and adapted for crypto — to inform its trading. That vehicle, and additional investment products, are now quite overweight cash as market participants parse the likelihood of yet more counterparties having to close up shop before year end.&nbsp;



Steinberg and execs have undertaken a “deep dive” into Arca’s response mechanisms to contain sudden market plunges. The self evaluation has focused on risk, initial counterparty due diligence and regular followup check-ins.&nbsp;



“You can’t get everything right, and if you’re stagnant, you’re [in trouble],” Steinberg said. “What worked yesterday won’t work tomorrow. Even when things go wrong, you’ll have to evaluate them, too.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Dodging Worst of FTX, Arca Won’t Stay ‘Stagnant’

Ornella Hernandez

<div id="highlights-block_63512e0fdd8fe" class="highlights">
 <ul>
 <li>The NFT market possesses a total market cap of more than $11.3 billion, says Nansen</li>
 <li>“Many of the decentralized economies being built will run on NFT technology,” says Mintify founder</li>
 </ul>
 
</div>



Capitalizing off growing interest in refining NFT trading opportunities for professional money-makers, digital collectibles analytics startup Mintify has raised a seed round.&nbsp;



Digital assets-focused investment manager Arca led the $1.6 million round. The corresponding valuation was not disclosed.&nbsp;



Current NFT trading marketplaces from <a href="https://cms.blockworks.co/opensea-adds-avalanche-marketplace-avax-traders-shrug/" target="_blank" rel="noreferrer noopener">OpenSea</a> to <a href="https://cms.blockworks.co/sudoswap-is-getting-a-new-governance-token/" target="_blank" rel="noreferrer noopener">SudoSwap</a> tend to be limited in terms of functionality, real-time data and scope that professionals crypto investors can use to craft and deploy NFT trading strategies. Mintify’s bet: a Bloomberg-like trading terminal built from the ground up for NFTs, ProDash. 



Arca’s Endeavor Fund, Alchemy Ventures, Psalion, as well as GSR and Fasanara also participated in the fundraise.&nbsp;



Mintify’s founder and CEO, Evan Varsamis, believes their trading terminal can provide software and data access at a caliber comparable to Bloomberg&#8217;s and its role in the stock market.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Our goal is to bring tools to market that are familiar to users of existing trading platforms while exposing them to new and powerful NFT based economies and markets,” Varsamis said.</blockquote>



A major issue with current NFT marketplaces, according to Varsamis, is that they are built using technology that is not interoperable with other chains and thus locked into specific blockchain ecosystems and unable to support multiple blockchains.



There are a few other multi-chain NFT aggregators like Mintify that focus on pro traders, such as Blur.io and Curio. There isn’t, however, a single interface that aggregates all NFT collections and economies across marketplaces, liquidity and chains.



“NFT marketplaces are competing with one another across and within the same chain ecosystem, creating competition and fragmentation of NFT liquidity,” he said.



Venture capital firms like Arca appear to be bullish on the NFT market that, despite <a href="https://cms.blockworks.co/mutant-ape-yacht-club-and-cryptopunks-among-this-weeks-recording-breaking-nft-sales/" target="_blank" rel="noreferrer noopener">recent waning monthly trade volumes</a>, still has a total market cap of at least $11.3 billion, <a href="https://www.nansen.ai/guides/nft-statistics-2022" target="_blank" rel="noreferrer noopener">according</a> to Nansen.



“Following the dynamic rise to relevance of non-fungible assets in the last 24 months, there has been a glaring need for infrastructure tooling,” said Sasha Fleyshman, a portfolio manager at Arca, in a statement. “The ecosystem has grown at a rate such that the product lines have far outpaced the rails needed to efficiently facilitate the market.”



Asked what Mintify’s vision of future markets looks like, Varsamis said:



“We believe many of the decentralized economies being built will run on NFT technology. Whether it’s on-chain music, Web3 game assets, metaverse property or representations of real-world real estate, these verticals will create serious economic activity based on the NFT standard.”



The Mintify terminal is starting with Ethereum support and has plans to introduce more chains and layer-2s in the coming months.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Venture Capital Seeds NFT Trading Tooling Firm Mintify

David Canellis

<div id="highlights-block_62a8e9e6b31d4" class="highlights">
 <ul>
 <li>“Macro is driving problems with Celsius rather than Celsius driving problems for the market,” Arca’s Dorman said</li>
 <li>Scaramucci is still long-term bullish but warned crypto investors must stomach current volatility</li>
 </ul>
 
</div>



Crypto markets are squarely in the toilet. Bitcoin is trading around $22,000 — almost 70% below its November all-time high. Ether, somehow, has fared even worse.



Collapsing lending platform Celsius makes for an easy scapegoat for the widespread carnage. Rumors of its insolvency preceded Celsius&#8217; native token, CEL, dumping 50% this month. The platform has since <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">locked</a> users out of their accounts while it wrangles various leveraged decentralized finance (DeFi) positions.



Just weeks ago, markets reeled from the Terra ecosystem’s <a href="https://cms.blockworks.co/?s=terra" target="_blank" rel="noreferrer noopener">implosion</a>, which all but wiped out the ninth and 10th largest tokens by market capitalization and some $40 billion in representative value along with it.&nbsp;



But macroeconomic factors such as inflation, rate hikes and the war in Ukraine have pushed the tech-heavy Nasdaq and the broader S&amp;P 500 down 30% and 20%, respectively, this year as the US flirts with a recession. Commodities, meanwhile, are surging, with benchmark index S&amp;P GSCI up more than 40% year to date.&nbsp;



It’s clear investors are moving from “risky” assets such as crypto and tech stocks into more recession-resistant plays.&nbsp;



It all presents a classic chicken-and-egg problem: Did Celsius trigger cryptocurrency to shed more than 25% from its collective value over the past week, or are investors simply de-risking across the board?



<h3 class="wp-block-heading">The Great De-risking</h3>



Anthony Scaramucci, managing partner at hedge fund of funds SkyBridge Capital, told Blockworks he wasn’t surprised by sinking crypto prices. SkyBridge offers an institutional bitcoin fund, as well as other vehicles designed to offer limited partners crypto exposure.&nbsp;



“You have a risk-off market, an oil crisis born from the current war environment, and you have the vestiges of the pandemic,” Scaramucci said. “As well, we may not be feeling it as much in Europe and the United States, but they&#8217;re going through ‘zero Covid’ lockdown strategies in China, and that&#8217;s having a huge effect on the supply chain.”



The precarious macro landscape — combined with too much money in traders’ pockets as a result of US stimulus measures — has led to big inflation numbers, according to Scaramucci, causing correlation across multiple asset classes, as with tech stocks and bitcoin.&nbsp;



“Bitcoin, in a buoyant market, goes up more than the market,” he said. “In a downtrodden, depressed market, it&#8217;s going to go down more.”



The financier posited rising inflation is not likely systemic or secular, but born directly from the aforementioned ongoing crises.&nbsp;



“A year from now, we could very well be out of the pandemic, and the inflation numbers could actually trend down,” added Scaramucci, who this week <a href="https://twitter.com/SquawkCNBC/status/1536314248539815936" target="_blank" rel="noreferrer noopener">told</a> CNBC that SkyBridge had just bought more bitcoin and ether. “The future of the web is going to include these decentralized technologies — I&#8217;m incredibly long-term bullish. You just have to have the stomach for this level of volatility right now.”



<h3 class="wp-block-heading">Macro factors exposed unsustainable digital assets</h3>



Jeff Dorman, chief investment officer at crypto investment firm Arca, said the dampened macro environment has driven some participants to take on additional risk.&nbsp;



“I think macro is driving problems with Celsius, rather than Celsius driving problems for the market,” Dorman said. “If Bob gives me one bitcoin, (BTC) and I pay him 2% interest for that, and then I lend it to Alice, who pays me 3% — that’s easy. I have a one-for-one asset liability match. And I’m making 1% net interest margin on the spread,” Dorman said.



Problems arise when Bob gives five BTC, but Alice only wants to borrow one. The lender still has to pay Bob 2% on his five BTC while Alice is only paying the lender 3% on one.



“Now, I have to figure out how to make up that yield,” Dorman said. “So, what am I going to do? I&#8217;m gonna go do risky hedge fund shit to make up that yield and hope that nobody knows what I&#8217;m doing — because nobody&#8217;s paying attention, because it&#8217;s unregulated. That’s where these companies get in trouble: They&#8217;re basically operating like unregistered hedge funds.&#8221;



But Dorman rejected the current zeitgeist that demands investors lump all digital assets together to consider them one giant risk trade, with bitcoin the least risky, outside of stablecoins.



Believing that bitcoin is king and everything else is an altcoin is an “archaic way of thinking about this market,” he said, the equivalent of labeling the S&amp;P 500 the only ETF and everything else a lesser, alternative ETF.



Crypto investors might wonder: Absent an exit from digital asset markets entirely, what does de-risking look like?



<h3 class="wp-block-heading">Defensive digital assets</h3>



Of course, there are stablecoins, some riskier than others. (SkyBridge’s Scaramucci said Circle’s USD Coin and Tether held up remarkably well throughout the recent chaos, with both firms processing billions of dollars worth of redemptions without downtime.)



Scaramucci suggested investors stay away from leverage, saying: “Stay unlevered. Be long term in your orientation. What&#8217;s caused the upside surprises and the downside surprises is the leverage in the system.”



To Arca’s Dorman, persistent price correlation in crypto is the result of an immature investor class, rather than anything inherent to digital assets.



“In theory, bitcoin has nothing to do with Axie Infinity, which has nothing to do with BNB,” Dorman said. “But if one guy owns all three, and they&#8217;re using those three as collateral to do something, they&#8217;re going to be a forced seller of all three at the same time.”



Crypto exchange tokens should be resistant to market downturns in a mature market (there’s been some <a href="https://cms.blockworks.co/native-crypto-exchange-tokens-hint-at-first-sign-of-broader-market-recovery/" target="_blank" rel="noreferrer noopener">indication</a> already), while native assets for blockchain-powered games should even <a href="https://cms.blockworks.co/crypto-markets-have-tanked-but-not-blockchain-based-gaming/" target="_blank" rel="noreferrer noopener">prove resilient</a> during a recession, Dorman said — as long as the tokens are structured with sustainability in mind.



“In the digital asset world, what are the areas where investors won&#8217;t stop what they&#8217;re doing just because of a bad market or because of a recession? Gamers don&#8217;t stop gaming because of recession,” he said. “If anything, they actually start gaming more, because they have more time on their hands and they&#8217;re not working. Gaming, in theory, should be a defensive sector.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Did Macro Kill Crypto or Are Risk-laden Lenders to Blame?

Garrett Harper

On today&#8217;s episode of &#8220;<a href="https://www.youtube.com/channel/UCEOv-8wHvYC6mzsY2Gm5WcQ" target="_blank" rel="noreferrer noopener">Empire</a>,&#8221; Jason and Santiago are joined by Jeff Dorman, chief investment officer at Arca. Jeff is a prominent crypto investor known for his fundamental analysis, contrarian bets and ability to simplify crypto&#8217;s arcane topics.



In this episode, Jeff Dorman explains crypto&#8217;s response to macro, why fundamentals matter, equity tokenization and crypto&#8217;s most exciting developments. Don&#8217;t miss Jeff&#8217;s insights on where crypto is headed next!



Plus, hear more on:



<ul class="wp-block-list"><li>BTC vs. NASDAQ</li><li>Crypto&#8217;s watershed moment</li><li>CeFi merging with Defi</li><li>How to value layer-1 blockchains</li><li>And so much more!</li></ul>



Check out what they had to say in the video below.👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Crypto’s Next Chapter | Jeff Dorman" width="1024" height="576" src="https://www.youtube.com/embed/XCFSYU_EJws?start=2529&#038;feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<h3 class="wp-block-heading">About the show</h3>



&#8220;Empire&#8221; is a twice-a-week show where we share the real crypto stories that aren’t heard elsewhere. On Mondays, Jason and Santiago Santos interview crypto industry movers and shakers to talk about their struggles, bold moves and tough decisions. Finish off the week with Friday&#8217;s weekly roundup episode that covers the top news and narratives of the week.



For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; as a &#8220;How I Built This&#8221; for the bitcoin and crypto industry.



Subscribe to &#8220;Empire&#8221; today on&nbsp;<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://open.spotify.com/show/4UTePv1CR3APdKOiosR3Iq" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/channel/UCEOv-8wHvYC6mzsY2Gm5WcQ" target="_blank" rel="noreferrer noopener">YouTube</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Podcast: Crypto’s Next Chapter | Jeff Dorman

Morgan Chittum

<div id="highlights-block_624b5f8e3bf06" class="highlights">
 <ul>
 <li>NFT financialization verticals include: lending, fractionalization, rental, pricing and aggregation</li>
 <li>NFT-backed loans could​​ “allow people more flexibility with how they use their capital,” Arca portfolio manager Sasha Fleyshman told Blockworks</li>
 </ul>
 
</div>



Rising sales volumes and adoption is the prevailing NFT market trend. But behind the explosive growth lies a bottleneck in the nascent space, which industry participants such as Matrixport Ventures’ Daniel Yan say could be alleviated by new financial layers.



Large brands such as Nike, Adidas and Louis Vuitton are jumping in on the blockchain-based collectibles trend, and the number of NFT (non-fungible token) buyers hit an all-time high of 895,000, according to data tracker <a href="https://cryptoslam.io/nftglobal" target="_blank" rel="noreferrer noopener">CryptoSlam</a>. But that’s not the whole story, Yan told Blockworks.



“When we talk about growth in the NFT market, we&#8217;re talking about the trading volume in marketplaces, primarily OpenSea,” Yan said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Volumes are substantially higher [than a year ago], but what is not really growing concurrently with this is liquidity of NFTs.”</blockquote>



Take CryptoPunks. There are about 10,000 on the peer-to-peer market, each with its own price. “It&#8217;s pretty difficult to aggregate that liquidity,” he noted.



NFT financialization verticals such as lending, fractionalization, rentals, pricing and aggregation of the assets could help solve this, according to a <a href="https://www.matrixport.com/article/NFT-Financialization-Trends-and-Opportunities-" target="_blank" rel="noreferrer noopener">recent report</a> from digital asset firm Matrixport.



Peer-to-peer NFT lending platforms and liquidity providers include NFTfi, Arcade and MetaStreet. Since 2020, NFTfi has underwritten more than 5,000 loans and recorded $80 million in cumulative loan volume, per the report.



Arca portfolio manager Sasha Fleyshman told Blockworks that NFT-backed loans could​​ “allow people more flexibility with how they use their capital.”&nbsp;



Such loans, according to Fleyshman, could help people access the value of assets that have sharply appreciated but without selling them and potentially triggering taxable events. Many also become attached to their NFTs and don’t want to part with them.



Last week, MetaStreet and NFTfi facilitated the largest NFT-backed loan at $8.32 million for 104 CryptoPunks. The loan has a 10% interest rate (APR) with a 90-day duration, Blockworks exclusively <a href="https://cms.blockworks.co/nft-whale-who-ditched-auction-of-104-cryptopunks-lands-8m-loan/" target="_blank" rel="noreferrer noopener">reported</a>.



Nexo, a major crypto lender, also <a href="https://cms.blockworks.co/nexo-to-launch-nft-backed-lending-bitwise-debuts-an-nft-index-fund/" target="_blank" rel="noreferrer noopener">announced</a> it was launching an NFT-backed lending desk last year. The service, however, accepts only blue-chip collections such as Bored Ape Yacht Club (BAYC) and CryptoPunks right now.



Although industry participants are quickly exploring more financial layers of the asset class, NFT-backed lending makes up less than 1% of its total addressable market (TAM).



“The first step along that path is finding a solid baseline in the derivatives markets, which has been worked on right now — fungible representations of collections,” Fleyshman said. “And as that market expands — typically it&#8217;s 5 to 10 times bigger than spot markets…and solidifies, we&#8217;ll have a more liquid observable price, which protects the lending desks, which then allows them to offer more attractive rates.”



That, Fleyshman expects, will bring in more buyers.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Solving NFTs’ ‘Liquidity Problem’: Can Financialization Help?

Ben Strack

<div id="highlights-block_62347c36f4570" class="highlights">
 <ul>
 <li>A former Federal Reserve Bank of New York employee has joined a lending protocol</li>
 <li>Crypto-focused asset manager Arca went on a hiring spree</li>
 </ul>
 
</div>



The gaming and NFT arm of Ethereum scaling platform Polygon has announced a range of hires from some of the largest Web2 companies.&nbsp;



Polygon Studios hired Michael Blank and Young Ko as its chief operating officer and chief financial officer, respectively. Blank joins after working nearly two decades at game developer and publisher Electronic Arts, while Ko spent the past 9 years as the vice president of finance at Penske Media, which includes brands Rolling Stone and Billboard.



Urvit Goel, who most recently helped Amazon launch its cloud gaming business, joins Polygon Studios as vice president of gaming business development. Charnjit Bansi, who was director of product management at Mythical Games, will be vice president of game design.



Ben Watley is Polygon Studio’s new senior director of strategy for gaming, joining from Electronic Arts. He will work alongside Will Matteson, an ex-NASA software engineer and Riot Games strategist, who joins Polygon Studios as corporate strategy manager.&nbsp;&nbsp;&nbsp;



The new hires join Polygon Studio’s recently appointed CEO, Ryan Wyatt, who previously headed YouTube’s gaming vertical.



Crypto exchange Bitstamp USA has hired Rika Khurdayan as its chief legal officer, Silvia Lacayo as head of marketing and Michael Levi as head of product and strategy.



Khurdayan joins from New York-based blockchain law practice KSTechLaw, which she founded. Lacayo most recently worked as head of marketing for software company Viable and also held top marketing roles at ZipRecruiter, Chainalysis and Unilever.



Levi was a managing director for nearly a decade at Level One Consulting Group, a firm focused on marketing, sales and business development strategy. He was also recently chief marketing officer for blockchain company Kava Labs, according to his LinkedIn page.&nbsp;



Crypto-focused asset manager Arca named Deborah Djeu its chief compliance officer and deputy general counsel to oversee the firm’s registered and private funds. She joins from crypto exchange Okcoin, where she was head of regulatory and chief compliance officer.



Scott Helfman, who was most recently director of public affairs at Citi, is Arca’s new head of communications. Before his decade-long tenure at Citi, he served in several communications roles at Deutsche Bank.&nbsp;



Annelise Osborne, who is now head of institutional for Arca’s innovation arm, Arca Labs, rounds out the company’s new additions. She had worked in the digital asset space as the chief operating officer of Propellr and spent 12 years at Moody&#8217;s Investor Service running commercial real estate teams within the structured finance group. 



CoinDesk named Alan Campbell as president of data and indices. The company’s flagship product, the CoinDesk Bitcoin Price Index (XBX), has been in operation since 2014.



Campbell was previously head of product management at Bloomberg Indices and also formerly managed Bloomberg Terminal functions and special projects for the company’s CEO.



Brandon Neal, who worked at the Federal Reserve Bank of New York for nearly a decade, has joined Euler Finance. He now serves as the lending protocol’s chief operating officer.



Neal was most recently a Treasury auction directorate at the bank and previously handled governance and strategic planning.&nbsp;&nbsp;&nbsp;



In addition to the new hires this week, blockchain infrastructure company announced that it is looking to hire more than 600 new employees following its latest <a href="https://cms.blockworks.co/consensys-plans-to-redesign-metamask-and-hire-600-new-employees/" target="_blank" rel="noreferrer noopener">$450 million fundraising round</a>.



Job postings with titles containing terms such as Bitcoin, Ethereum, blockchain and cryptocurrency grew 395% in the US from 2020 to 2021, according to <a href="https://www.linkedin.com/posts/linkedin-news_theworkshift-economy-labormarket-activity-6887062336839016450-67iT/" target="_blank" rel="noreferrer noopener">a LinkedIn analysis</a>. This outpaced the broader tech industry, which saw a 98% increase in listings during the same time period.



A Blockworks search on Thursday of US LinkedIn-listed jobs featuring the keyword “crypto” yielded 16,862 results.



<hr class="wp-block-separator"/>



Did you know that Blockworks is hiring too? Check out our available roles on our <a href="https://cms.blockworks.co/careers/" target="_blank" rel="noreferrer noopener">Careers page</a>!



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

The Latest in Crypto Hiring: Polygon Studios Adds Range of Talent

Jacquelyn Melinek

<div id="highlights-block_61fd75403556f" class="highlights">
 <ul>
 <li>On Friday, layer-2 infrastructure firm Qredo closed its $80 million Series A round led by 10T Holdings</li>
 <li>Earlier this week, Seven Seven Six closed a whopping $500 million venture fund for its second fund, which will focus primarily on crypto startups</li>
 </ul>
 
</div>



Capital continued to pour into crypto this week, despite a recent downturn in digital asset markets.



“Significant capital raises that closed last year will be deployed now, I expect an increased pace of activity,” Stan Miroshnik, co-founder of 10T Holdings, <a href="https://cms.blockworks.co/crypto-vc-market-poised-for-growth/" target="_blank" rel="noreferrer noopener">told</a> Blockworks earlier this week.



Layer-2 infrastructure firm Qredo closed its $80 million Series A round Friday, led by 10T Holdings, with participation from Coinbase, Avalanche and Terra. The raise brings its valuation to $640 million, after raising $120 million across the past 12 months.



“Infrastructure is a key battleground for scaling crypto adoption,” <a href="https://cms.blockworks.co/podcast-is-the-crypto-bull-market-over-dan-tapiero-and-dan-morehead/" target="_blank" rel="noreferrer noopener">Dan Tapiero</a>, founder and CEO of 10T Holdings, said.



More than $800 million was raised this week, according to PitchBook data. Some of the larger rounds include <a href="https://cms.blockworks.co/ftx-valued-at-32-billion/" target="_blank" rel="noreferrer noopener">FTX’s $400 million</a>, <a href="https://cms.blockworks.co/crypto-wallet-raises-109-million/" target="_blank" rel="noreferrer noopener">Phantom’s $109 million</a> and <a href="https://cms.blockworks.co/web3-data-firm-dune-analytics-hits-unicorn-status/" target="_blank" rel="noreferrer noopener">Dune Analytics’ $69.42 million</a> capital raises.



Other fundraisers include:



<ul class="wp-block-list"><li>Pixel Vault’s $100 million, which will be used to help launch an NFT platform</li><li>Tribal Credit, which offers crypto financial services, raised $60 million in a round led by SoftBank to expand into Latin America</li><li>CoinFund co-led $5.7 million seed round in prime brokerage liquidity protocol Primex Finance</li><li>Celebrity-focused NFT platform Colexion’s $5 million raise to expand into the metaverse</li><li>DAO-to-DAO credit lending platform Kyoko Finance closed $3 million private round led by Animoca Brands</li></ul>



Meanwhile, Reddit Co-founder Alexis Ohanian’s venture capital firm, Seven Seven Six (776), closed a whopping $500 million venture fund. The raise was oversubscribed, with $300 million going toward funding early-stage startups and $200 million going toward companies in growth stages.



The firm plans to primarily invest in crypto startups by the end of the year, Ohanian <a href="https://www.wsj.com/articles/alexis-ohanians-venture-capital-firm-raises-500-million-doubles-down-on-crypto-startups-11643716803" target="_blank" rel="noreferrer noopener">told</a> the Wall Street Journal. The VC has over $750 million assets under management, just $26 million short of matching their name, 776, Ohanian <a href="https://twitter.com/alexisohanian/status/1488496693549142019?s=20&amp;t=Vp_Sq3zKGfyP5m6tHu0NWg" target="_blank" rel="noreferrer noopener">quipped</a> on Twitter.



Ark Invest filed to launch a venture fund that would invest in companies involved in disruptive innovation, including those related to crypto and blockchain technology, <a href="https://cms.blockworks.co/ark-invest-seeks-to-launch-venture-fund/">Blockworks reported</a>.&nbsp;



Separately, Arca also launched its NFT fund this week, which oversubscribed its initial cap of <a href="https://www.globenewswire.com/news-release/2022/02/03/2378523/0/en/Arca-s-Oversubscribed-NFT-Fund-Closes-At-50M-Cap.html" target="_blank" rel="noreferrer noopener">$50 million</a>. The fund joins the firm’s three other investment products, including its Digital Assets Fund and Digital Yield Fund. The fund will invest in NFTs, as well as digital property, in-game assets, DeFi-integrated NFTs and utility- and reward-based NFTs.



“We believe that, at present, there is a dislocation between the value of non fungible assets and the value of the underpinning ecosystem via equity, tokens, etc,” Arca Portfolio Manager Sasha Fleyshman told Blockworks in a statement. “We look to both capitalize on that mismatch and catalyze the perception change of investing directly into NFTs as investment grade assets.”



Check back next week for even more funding news.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Fundraising Wrap: Over $800M in Investments Poured into Crypto This Week

Sam Reynolds

<div id="highlights-block_61b1f58f54475" class="highlights">
 <ul>
 <li>The market doesn’t seem to think Joseph Delong’s resignation will have a material impact on SushiSwap’s fortunes</li>
 <li>Open interest remains consistent, suggesting that traders are comfortable with Sushi’s current price</li>
 </ul>
 
</div>



Hope of a price recovery among Sushi governance token holders after the protocol’s CTO, Joseph Delong, resigned was shattered early Thursday as SUSHI had gained 20% on word of his resignation but subsequently dropped back down to Earth. 



The token is up about 3% in the last 24 hours, according to <a href="https://www.coingecko.com/en/coins/sushi" target="_blank" rel="noreferrer noopener">CoinGecko</a>, and started the US trading day at around $6. Initially, when Delong <a href="https://twitter.com/josephdelong/status/1468689021530427395?s=20" target="_blank" rel="noreferrer noopener">tweeted</a> his resignation, the token spiked to $6.90 — up approximately 20%.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1015" height="350" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png" alt="" class="wp-image-12374" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=1015 1015w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/2021-12-09-sushi.png?w=80 80w" sizes="auto, (max-width: 1015px) 100vw, 1015px" /><figcaption>Delong sent a message embedded in <a href="https://etherscan.io/tx/0xa988c166bcbf94726180acd7bfa313319dcf85d9a5ad980af6b5db809f0ce338" target="_blank" rel="noreferrer noopener">an Ethereum transaction</a> using his private key which must be read as UTF-8 data to decode</figcaption></figure>



SushiSwap’s token is down about 50% in the past month.



Open interest data is flat, consolidating around the $2.19 million mark, showing that investors are satisfied at the token’s current pricing.&nbsp;&nbsp;



At the core of the token’s decline is the market’s lack of confidence in the DEX’s future, amidst infighting <a href="https://cms.blockworks.co/update-cto-resigns-as-sushiswap-struggles-arca-submits-restructuring-proposal/" target="_blank" rel="noreferrer noopener">between Delong and a clique of executives</a> and the rest of the DAO community.&nbsp;



“Sushi is currently demonstrating the perils of DAO governance for all to see, with token holders now turning on the core team in a vicious public battle,” Will Harborne, CEO of DEX DeversiFi told Blockworks via Telegram.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“With Delong having been leading the development of Sushi’s next generation AMM Trident, hoped by many to be the key to challenging Uniswap V3, this will leave the community governed project even more leaderless,&#8221; he said.</blockquote>



While there have been <a href="https://cms.blockworks.co/update-cto-resigns-as-sushiswap-struggles-arca-submits-restructuring-proposal/">proposa</a><a href="https://cms.blockworks.co/update-cto-resigns-as-sushiswap-struggles-arca-submits-restructuring-proposal/" target="_blank" rel="noreferrer noopener">l</a><a href="https://cms.blockworks.co/update-cto-resigns-as-sushiswap-struggles-arca-submits-restructuring-proposal/">s to reform</a> the DEX’s governance by investors like Arca, which would make it more in line with a hierarchical corporation, no action has yet been taken to seriously consider its implementation. 



“DAOs aren&#8217;t a silver bullet solution and need leadership and good governance just like any other organization. When there is misalignment between leadership and community, the entire DAO will suffer,” Luuk Weber, strategic lead at PrimeDAO told Blockworks in an interview.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Single token governance, as used in Sushi, allows for wide governance participation, but may also cause tension between token holders and leaders,&#8221; said Weber.</blockquote>



In the case of Sushi, 64% of all governance tokens are held by whales, according to <a href="https://app.intotheblock.com/coin/SUSHI/deep-dive?group=ownership&amp;chart=all" target="_blank" rel="noreferrer noopener">IntoTheBlock</a>, while 27% of all governance tokens are held by one sole investor.



“This causes misalignment between leadership and the community which ultimately ends with both sides losing faith in each other; driving down the value of the governance token as it loses its power to coordinate contributors,” added Weber.  



Sushi is down from an all-time high of $23, which it hit in mid-March.



“We’ve seen Sushi recover from worse crises in the past and so much hope remains, but it will require the DAO to find strong new leadership and ideas from within the community fast to avoid a death spiral,&#8221; concluded Harborne.




<div class="tradingview-widget-container">
 <div class="tradingview-widget-container__widget"></div>
 <script type="text/javascript" src="https://s3.tradingview.com/external-embedding/embed-widget-mini-symbol-overview.js" async="">
 {
 "symbol": "FTX:SUSHIUSD",
 "width": 350,
 "height": 220,
 "locale": "en",
 "dateRange": "1M",
 "colorTheme": "light",
 "trendLineColor": "rgba(41, 98, 255, 1)",
 "underLineColor": "rgba(41, 98, 255, 0.3)",
 "underLineBottomColor": "rgba(41, 98, 255, 0)",
 "isTransparent": false,
 "autosize": false,
 "largeChartUrl": ""
}
 </script>
</div>




<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
<hr class="wp-block-separator">

Sushi Opens Thursday Up 3% After CTO Resignation

<div id="highlights-block_61b0a2856de24" class="highlights">
 <ul>
 <li>SushiSwap is plagued with ‘corporate’ infighting as a power struggle ensues between its CTO and other stakeholders over differences of opinion on if an update to the platform is ready to ship</li>
 <li>Arca proposes a restructuring of the SushiSwap DAO to include organizational level hierarchy, product teams, and multi-sig so that the DAO’s organizational structure and governance would reflect a corporation with similar revenue</li>
 </ul>
 
</div>



The Chief Technology Officer of SushiSwap Joseph Delong has resigned, according to a <a href="https://twitter.com/josephdelong/status/1468689021530427395?s=12" target="_blank" rel="noreferrer noopener">tweet</a> he wrote on Wednesday.&nbsp;



“In the interest of the Sushi Community I am resigning as CTO effective immediately,” Delong wrote. “I very much enjoyed the things that we built together and will look back positively on this moment,” he added.&nbsp;



Blockworks reported earlier today that SushiSwap, one of the largest decentralized exchanges, was dealing with another round of ‘corporate’ infighting between Delong, and broader community, digital asset management firm Arca — an investor in SushiSwap — which proposed a comprehensive reform of the DAO’s governance structure to match that of a corporation.&nbsp;



“I wish Sushi the best and am saddened that Sushi is so imperiled within and without. The chaos that is occurring now is unlikely to result in a resolution that will leave the DAO as much more of a shadow than it once was without a radical structural transformation,” Delong said in a follow-up <a href="https://twitter.com/josephdelong/status/1468689023761801217">tweet</a>.&nbsp;



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="303" height="315" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg" alt="" class="wp-image-12343" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=303 303w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=289 289w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=247 247w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=251 251w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=211 211w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Joseph.jpeg?w=77 77w" sizes="auto, (max-width: 303px) 100vw, 303px" /><figcaption>Joseph Delong; Source: Sushi via Medium</figcaption></figure></div>



Delong recommended the installation of an executive-level group outside of the DAO and said in another <a href="https://twitter.com/josephdelong/status/1468689025607376899?s=20" target="_blank" rel="noreferrer noopener">tweet</a> that it should be, “wary of any self proclaimed leaders arising from the current core team.”&nbsp;



<h3 class="wp-block-heading">The Backstory: Why SushiSwap Needs Reform&nbsp;</h3>



Despite SushiSwap pushing out <a href="https://www.coingecko.com/en/exchanges/sushiswap" target="_blank" rel="noreferrer noopener">nearly $350 million in 24-hour volume</a>, the DAO behind one of the biggest DEXs has been plagued with infighting since its inception. In September 2020, pseudonymous SushiSwap founder Chef Nomi was axed after selling off $14 million of ether earmarked for a development fund. An individual named 0xMaki was appointed the project lead, backed by investors like FTX’s Sam Bankman-Fried. 0xMaki has since <a href="https://cms.blockworks.co/sushiswap-swaps-out-co-founder-0xmaki/" target="_blank" rel="noreferrer noopener">stepped down</a> from daily leadership and transitioned to an advisory capacity&nbsp; — though allegations swirl that he was forced from the role by a clique of developers and other stakeholders.&nbsp;



According to a report from <a href="https://rekt.news/sushiswap-scandal/" target="_blank" rel="noreferrer noopener">Rekt</a>, CTO Delong and core team members Omakase, 0xKeno, and Rachel Chu, were said to have initiated an internal vote to push 0xMaki out of a daily leadership position and into a passive advisory role. But in turn this clique, known as JOKR, faces derogatory allegations of its own: $9,000 dinners at NFTNYC, $5,000 tickets to mixers, and siphoning off funds raised from the BitDAO (an affiliated project) token sale.&nbsp;



For his part, Delong took to Twitter to call the whole affair “absurd defamation” and threatened to leave the project if his team isn’t granted more autonomy and an increase in compensation.&nbsp;



<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">There has been a lot of drama within Sushi and overt manipulation coming from outside Sushi. As a leader I don&#39;t want to discuss these topics as I think our work products speak for themselves, but this absurd defamation has risen to a level I can&#39;t tolerate. 𝓪 𝓽𝓱𝓻𝓮𝓪𝓭 💕&mdash; Joseph Delong (@josephdelong) <a href="https://twitter.com/josephdelong/status/1467498477542379522?ref_src=twsrc%5Etfw">December 5, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“I am going to ship Trident [a new iteration of the DEX software], and if you do not give us the autonomy to continue operations, the capability to form leadership, and increase compensation across the board I will leave,” he tweeted.



If the community behind the DEX didn’t back Delong and his team, he said he would “peacefully transfer all the accounts and go and build something equally as successful, and you can find someone else to bully.”



Sushi’s governance token, SUSHI, has been on a steady slide since September 16, when it traded as high as $16. Now it’s under $6.




<div class="tradingview-widget-container">
 <div class="tradingview-widget-container__widget"></div>
 <script type="text/javascript" src="https://s3.tradingview.com/external-embedding/embed-widget-mini-symbol-overview.js" async="">
 {
 "symbol": "FTX:SUSHIUSD",
 "width": "350",
 "height": "220",
 "locale": "en",
 "dateRange": "3M",
 "colorTheme": "light",
 "trendLineColor": "rgba(41, 98, 255, 1)",
 "underLineColor": "rgba(41, 98, 255, 0.3)",
 "underLineBottomColor": "rgba(41, 98, 255, 0)",
 "isTransparent": false,
 "autosize": false,
 "largeChartUrl": ""
}
 </script>
</div>




<h3 class="wp-block-heading">Arca’s Proposal&nbsp;</h3>



For any investor or stakeholder of a company that generates as much revenue as SushiSwap, such infighting would be concerning and would likely dissuade any further investment.&nbsp;



With that in mind, Arca, who’s Chief Investment Officer, Jeff Dorman once called Sushi one of <a href="https://twitter.com/jdorman81/status/1393243216875429895?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1393243218590855173%7Ctwgr%5E%7Ctwcon%5Es2_&amp;ref_url=https%3A%2F%2Fwww.cryptoglobe.com%2Flatest%2F2021%2F05%2Fsushiswaps-sushi-may-be-the-most-undervalued-token-in-the-space-says-arcas-cio%2F" target="_blank" rel="noreferrer noopener">the most undervalued</a> tokens currently on the market, <a href="https://forum.sushi.com/t/sushi-dao-restructure-proposal/6282" target="_blank" rel="noreferrer noopener">put forward a proposal</a> to reform the DAO’s structure to make it more inline with that of an equally sized corporation.&nbsp;



“This growth has been phenomenal but has led to natural growing pains that need to be addressed. In order to scale, each product line must be properly resourced to fully execute the community vision,” Arca’s Alex Woodard wrote.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This proposal aims to adequately structure Sushi Ops DAO, and future DAOs developing Sushi, with a formalized entity, processes, structure, and community leadership in order to capture and capitalize on future growth.”</blockquote>



Arca proposes that the operational structure of SushiSwap’s DAO become more hierarchical with product teams reporting to a product manager (similar to any sort of software company), multi-sig on key decisions involving hiring, firing, and fund management — like how any corporation would need two executives to sign off on key decisions — as well as the incorporation of a legal entity to employ developers.&nbsp;



Arca did not respond to a request for comment from Blockworks.&nbsp;



<h3 class="wp-block-heading">Corporate Governance for the DeFi Era</h3>



For investors, corporate governance proposals are nothing new and have been around since the advent of venture capital itself.&nbsp;



But what’s different in this era is that some of the hottest investment opportunities aren’t formally incorporated and lack a traditional executive-manager structure. Instead, influence on a project’s direction is all about who owns the most tokens and thus controls the votes.&nbsp;



A16Z, an active investor in the space, has released a <a href="https://a16z.com/2021/08/26/open-sourcing-our-token-delegate-program/" target="_blank" rel="noreferrer noopener">number</a> of <a href="https://a16z.com/2021/02/05/on-crypto-governance/" target="_blank" rel="noreferrer noopener">position papers</a> that outline is position on DeFi project governance. Part of a16z’s position is that the investor sometimes doesn’t know what’s best for the project, and to help it scale there’s a delegation of tokens to partner organizations.&nbsp;



“Delegates must be empowered to vote independently from the token holder. This is an essential property for any well-designed delegation program. At a minimum, this means that the token holder should not attempt to influence or dictate its delegates’ participation in any way, either explicitly or implicitly,” the company wrote.



All of this comes as the total value locked in DeFi protocols stays well above the $100 billion mark and serious institutional money eyes its way in.



Both Arca’s proposal for SushiSwap’s organizational reform and a16z’s broader view on DeFi governance aren’t without controversy. In the thread that followed the proposal from Arca, there are comments that call the plan to formally incorporate part of SushiSwap a “trojan horse”; Harvard Law’s student Blockchain association, one of a16z’s delegates, is also a <a href="https://www.theblockcrypto.com/post/111185/harvard-law-blockchain-initiative-uniswap-dao" target="_blank" rel="noreferrer noopener">recipient of treasury grants</a> from Uniswap.&nbsp;



If anything, this shows just how fertile the whole space is and will take some time to develop, just as best practices for startup governance emerged alongside the development of Silicon Valley.



This story was updated on Dec. 8, 2021, at 4:57 pm ET.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
<hr class="wp-block-separator">

Update: CTO Resigns as SushiSwap Struggles, Arca Submits Restructuring Proposal

<div id="highlights-block_615ca4c11a023" class="highlights">
 <ul>
 <li>“We don’t want this to be a centrally planned thing, we want people to come up with their own ideas and submit them without creating a bias or too much reliance on us,” Nader Al-Naji said about The DeSo Foundation’s Octane Fund</li>
 <li>Arca’s fund will focus significantly on gaming and NFTs, while also spending time on DeFi and Web 3.0, David Nage, portfolio manager at Arca told Blockworks</li>
 </ul>
 
</div>



Asset management firm Arca launched its first venture-focused fund on Tuesday which was oversubscribed above its $30 million cap, the company said. Meanwhile, the DeSo Foundation has launched a $50 million developer fund, The Octane Fund, to accelerate the decentralized social (DeSo) ecosystem.&nbsp;



<h3 class="wp-block-heading">Investing in innovation</h3>



The Arca Endeavor Fund is an early-stage, closed-end venture fund focused on investing in innovative companies and people across the digital asset world, it said. Additionally, it has already made several investments, the company said.&nbsp;



The fund is the latest addition to Arca’s investment in digital assets after its flagship Digital Assets Fund was launched as well as its Digital Yield Fund, which was launched in early August.&nbsp;



The Endeavor Fund will focus significantly on gaming and non-fungible tokens, or NFTs, while also spending time on DeFi and Web 3.0, David Nage, portfolio manager at Arca told Blockworks via email. Nage will join Michael Dershewitz, Arca Funds’ chief operations officer and principal, in leading the latest fund.&nbsp;&nbsp;



“The focus on gaming comes from our experience being one of <a href="https://cms.blockworks.co/axie-infinity-developer-scores-152m-in-series-b-funding-nearing-3b-valuation/" target="_blank" rel="noreferrer noopener">Axie Infinity&#8217;s</a> first investors last year. We have seen the <a href="https://cms.blockworks.co/axie-infinity-rolls-out-staking-program-shakes-up-gaming-business-model/" target="_blank" rel="noreferrer noopener">play-to-earn</a> (P2E) narrative become incredibly significant in terms of the adoption of digital assets,” Nage said. “With over 30x growth of daily active users (DAU&#8217;s) from April of this year to 1.8M users today, plus an immensely important strategic relationship with YGG, it&#8217;s my belief we will see the next 100M users of digital assets come in via blockchain-based gaming within the next 1-2 years,” he added. 



<h3 class="wp-block-heading">Fueling DeSo</h3>



The DeSo Foundation’s new Octane Fund received the $50 million from its recent $200 million in funding, which includes investors from, including Andreessen Horowitz (a16z), Coinbase Ventures, Winklevoss Capital, Pantera Capital,Sequoia, Social Capital, TQ Ventures, Alexis Ohanian and others, Blockworks previously <a href="https://cms.blockworks.co/bitclout-creator-pseudonymous-no-more-announces-deso-ambitions/" target="_blank" rel="noreferrer noopener">reported</a>.&nbsp;



The DeSo blockchain, which is a new layer-1 blockchain, currently has over 100 applications built on it with over $1.4 billion in total transaction volume, the company said. The Octane Fund’s name comes from the idea that the DeSo ecosystem is set to explode, the creator of BitClout and DeSo Nader Al-Naji said in an interview with Blockworks.&nbsp;



While the fund sits within the DeSo Foundation, it is its own entity, according to Al-Naji. However, the foundation will direct the investment and decide where the capital goes, he said.&nbsp;



Currently, there are limited <a href="https://deso-0e166f8af041248ac7b12069111cd6e8.webflow.io/blog/a-50-million-fund-to-fuel-the-decentralized-social-developer-ecosystem" target="_blank" rel="noreferrer noopener">criteria</a> posted for who or what organizations can apply for funding.



While Al-Naji believes there’s a list of things that should be built on the DeSo blockchain, he also said the foundation hasn’t shared details yet because the foundation wants to see what the community comes up with before they release the list, he said.&nbsp;



“We don’t want this to be a centrally planned thing. We want people to come up with their own ideas and submit them without creating a bias or too much reliance on us,” Al-Naji said.&nbsp;



In the coming weeks, DeSo Foundation plans to announce other initiatives toward funding NFT artists on the DeSo blockchain as well as smaller creators.



The idea of decentralized social media is in the top of people&#8217;s minds this week after Monday&#8217;s outage at Facebook, Instagram and WhatsApp, which are all centralized social media platforms. Advocates for decentralized social ecosystems have expressed that there needs to be less centralized forces controlling the way people engage with one another online.&nbsp;



“You kind of have these three companies that control the vast majority of what we see online,” Al-Naji said. “With the Facebook outage, we kind of saw just how much is really influenced by a single company,” he added.&nbsp;



In the future, Al-Naji hopes that instead of content being monopolized by one or a few companies, users can create content through thousands of independent apps that serve their own purpose.



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

Arca and DeSo Foundation Kick Off New DeFi Funds

Liz Coyne

In the tenth and final episode of Blockworks&#8217; &#8220;<a href="https://www.youtube.com/watch?v=PjCGJTJI8J0&amp;t=5s" target="_blank" rel="noreferrer noopener">Generational Arbitrage</a>,&#8221; host Tyler Neville speaks with Rayne Steinberg, co-founder of WisdomTree with $75 billion of assets under management. 



After leaving WisdomTree in 2011, Rayne went on to co-found Arca in 2018. In three years Arca managed to grow to $400 million in digital assets under management. On this episode, Rayne shares the similarities between the digital asset ecosystem and the early ETF industry, generating alpha in this new asset class, active vs. passive, the problems with ESG investing and the generational divide in society.



They also discuss:



<ul class="wp-block-list"><li>Arca&#8217;s Treasury Fund</li><li>Arca&#8217;s actively managed fund</li><li>Institutional Interest </li><li>The Future of Arca</li><li>Scaling Arca in the digital age</li></ul>



Check out what they had to say in the video below. 👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="The future of digital asset investing | Rayne Steinberg" width="1024" height="576" src="https://www.youtube.com/embed/PjCGJTJI8J0?start=5&#038;feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



The social fabric of contemporary American life is tearing itself apart. On &#8220;Generational Arbitrage,&#8221; Tyler Neville, the former author of Blockworks&#8217; smash hit <a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Daily Newsletter</a>, dug into the institutions whose promises are left unfulfilled. 



While the show run has ended, you can still listen to all 10 episodes in the Blockworks archives on <a href="https://podcasts.apple.com/us/podcast/generational-arbitrage/id1571134391" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://open.spotify.com/show/1fPKtTSDvg7xzm8FaSljjL?si=1iHi3qpnSiCb34pwgd5hpQ&amp;dl_branch=1&amp;nd=1" target="_blank" rel="noreferrer noopener">Spotify</a> or watch episodes on <a href="https://www.youtube.com/watch?v=tNe4cMKNEU4" target="_blank" rel="noreferrer noopener">YouTube</a>.