Lessons for Web3 Founders/Investors Managing Capital 🤹

What Can We Learn from Celcius? (read the fkin fine print)

January 06, 2023

Happy Friday folks 👋🏻 - welcome back to Chain Catalyst, your best newsletter for web3 builders and investors. We have a lot to cover today. But… we cover what matters, so we won't go deep into the Logan Paul NFT drama 🤦 if you’re still curious, here’s a good recap.

In Today's Email:

What Matters: Celsius ‘Earn’ assets belong to… Celsius 🤷
Founders Highlight: Jonas Chen, Founder of Metacamp 🏕️
Deal Flows: MEXC Sei Network $20M Ecosystem Fund 💸

WHAT MATTERS

Judge Rules: Celsius 'Earn' Assets Belong to Celsius

State of play: A federal judge rules that Celsius 'Earn' assets belong to the bankrupt crypto lender, not the depositors of those assets. This means that users who have their funds stuck on Celsius will only recover a fraction of their capital.

In June 2022, Celsius halted withdrawals. When it filed for chapter 11 bankruptcy, there was $4.2 billion in the 'Earn' program. Only $23M was in stablecoins.
The court concludes that when the crypto assets were deposited into the 'Earn' program, the crypto assets became the property of Celsius, allowing Celsius to retain control over the assets during the bankruptcy proceedings.
While some 'Earn' users argued that Celsius was in breach of its own contract for failing to uphold fiduciary duties, the judge ruled that Celsius' terms of service are "unambiguous".

Why it matters: This ruling creates a lot of precedent for other ongoing bankruptcy cases. Putting aside FTX, BlockFi, and other bankrupt centralized entities, the Genesis-Gemini Earn fiasco is currently under the spotlight.

In short, Gemini Earn is Gemini exchange's yield-generating product. Genesis, owned by Digital Currency Group, is the partner responsible for generating those yields via lending out Gemini Earn's customers' assets. As Genesis goes through its "liquidity issues", both parties are now fighting over who's responsible for the $900M owed to Gemini Earn depositors

Earn Update: An Open Letter to @BarrySilbert
— Cameron Winklevoss (@cameron)
2:02 PM • Jan 2, 2023

DCG Situation:
- DCG Owes $2.025B
- Genesis can call their $1.675B loan
- Genesis owes $900M to Gemini
DCG Liq
- Grayscale $10B AUM x 2% = $200M x 3x multiple = $600M
- GBTC/ETHE Holdings = 9.7%/3.8% = $629M with discount, $1.17B at Par
- VC book = Firesale values in a bear
— Tommy Shaughnessy (@Shaughnessy119)
7:46 PM • Jan 5, 2023

For builders: Don't be fancy with the funds you've raised. More importantly, don't try to "manage" your runway capital by gambling them away in illiquid altcoins. These are actions that would've put you straight to jail in a web2 environment. Focus on building products, talking to customers, and generating revenue.

For investors: Don't underestimate the importance of counterparty diligence. When the yield is too good to be true, you're probably the yield. For a few years, we were all accustomed to the 8% USD stablecoin yield that many CeFi lenders provide while the interest rate remained at 0%. Something wasn't right.

BUILDER-INVESTOR HIGHLIGHT

Jonas Chen, Founder of Metacamp

Jonas Chen is the Founder of Metacamp, a web3 co-working and education platform 📚 — Metacamp provides courses, bootcamp, hackathon events, and a networking ecosystem for aspiring web3 founders, specifically those who want to build on Solana.

What previously was recent: Jonas started his career in Germany as an International Business and Technology student at Technische Hochschule Nürnberg Georg Simon Ohm (that’s a mouthful!). He was an electronic technician, chef, and not forget to mention, a breakdancer 🕺

His studies didn’t stop there. Jonas took a master’s degree from the Stockholm School of Economics for International Business and the National University of Singapore for International Management. This man loves his education.
Jonas’ entrepreneurial spirit started when he joined German Accelerator and German Entrepreneurship Asia as Assistant Program Manager, eventually becoming a Program Manager.

The big idea: Right now, Jonas is working on Metacamp. They offer blockchain bootcamps and workshops to strengthen the needed skills in your web3 journey. Thus far, they’ve amassed more than 600 community members. Backed by the Solana Foundation, they also have an NFT-gated co-working space in Singapore.

If you’re in Singapore and you’re looking for ways to break into web3, make sure to check out Metacamp! All of their programs are beginner friendly, taking you from zero-to-one, starting with learning basic coding skills, to launching a full-fledged MVP dApps in Solana.
Jonas also works on a charity project, OneDollarGlasses, a non-profit that provides eyeglasses in developing countries since 2012.

DEAL FLOWS

MEXC-Sei Network $20M Ecosystem Fund

MEXC-Sei Network $20M Ecosystem Fund: Singapore-based exchange MEXC will allocate $20M to support the developments of the Sei Network ecosystem. Sei Network is a layer 1 blockchain specifically designed to facilitate trading. Its features include native order matching, front-running protection, smart block propagation, and 600ms on-chain settlement.

"AMM [Automated Market Makers] was the dominant market-making method in crypto for the past 2 years. The lack of a more efficient market-making strategy is in large part because of technology restrictions like low speed and smart-contract restrictions. We believe Sei’s customized Layer 1 solution will be a game changer in the industry."

Deal flows in the past week:

Msafe wallet, $5M Seed Round

It's unsurprisingly another slow week. We might be propagating rumors, but words around the street seems to indicate LPs are backing from capital calls.

Couple of calls the last few days where pretty significant crypto people both said something to the effect of "LPs in venture funds that supposedly raised a lot of money aren't meeting capital calls, that dry powder isn't actually there"
— Leigh Drogen (@LDrogen)
6:46 PM • Jan 5, 2023

QUICK BITES

3AC subpoenaed by tweets.
Genesis cuts 30% of staff.
Ex-Celsius CEO sued by NYAG for fraud.
DOJ seizes Robinhood shares linked to FTX.
SBF files to protect his Robinhood shares.
Coinbase to pay $100M settlement with NYDFS.
SEC probes FTX investors’ due diligence.
SEC files to halt Binance US acquisition of Voyager.
Vauld rejects Nexo's final acquisition proposal.
Animoca reduces fundraising target to $1 billion.
TON blockchain launches decentralized file sharing solution.
Trader Joe expands to BNB Chain.
Juno encourages users to withdraw funds as custody partner Wyre shuts down.
Ex-FTX lawyer tipped off US prosecutors.
Huobi cuts 20% of staff.
DCG shuts down $3.5B wealth management business.
Genesis needs more time to solve lending crisis.
Silvergate tumbles 43% after FTX collapse sparks bank run.

MEME & NOTEWORTHY READS

Arthur Hayes’ recurring macro blog “Vitiligo”
Frictionless Capital’s report on making the case for Solana.
@0xkyle__'s thread on 2023 crypto outlooks summary.

new use case for decentralized social media - serving subpoenas, forever memorialized on the blockchain
— Meltem Demirors (@Melt_Dem)
5:08 PM • Jan 5, 2023

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.