African web3 startup Nestcoin declares it held its assets in FTX, lays off employees
African web3 startup Nestcoin has laid off some employees as FTX’s demise impacted its business. This information was shared by the startup’s CEO, Yele Bademosi, who, in a tweet, said FTX’s fall from grace affected his one-year-old startup, which held assets (cash and stablecoins) in the now-defunct crypto exchange to manage operational expenses.
Since Sam Bankman-Fried’s crypto empire — made up of FTX, Alameda Research and FTX Ventures — collapsed last week, there have been various reports of companies whose money is stuck in FTX, its crypto exchange platform. Some of them include Galois Capital, a hedge fund with half of its capital stuck at the collapsed crypto exchange; Genesis Trading, which had about $175 million locked on the crypto exchange; and Multicoin Capital, the famed crypto and web3 venture capital firm that has nearly 10% of its assets under management trapped. Nestcoin joins that growing list (more names are becoming known by the day); it appears most, if not all, of its assets, are stuck in FTX.
According to several reports, companies with money stuck on FTX might get their money back depending on how much FTX’s assets are ultimately worth. From its 23-page bankruptcy filing, FTX has more than 100,000 creditors, with assets in the range of $10 billion to $50 billion and liabilities within the same range.
Nestcoin, which Bademosi described in an interview with TechCrunch as a venture collective, is one of a handful of African startups that have received venture capital from FTX and Alameda Research, alongside 200+ foreign-based startups and investment firms, including Circle and Sequoia Capital. FTX, for instance, led a $150 million Series C extension round in Chipper Cash, an African cross-border payments company. Alameda Research, on the other hand, has backed Nigeria- and Kenya-based web3 company MARA; South African crypto exchange startup VALR; Congolese web3 startup Jambo; and Nigerian crypto exchange platform Bitnob. It’s still unclear if these other startups held their assets in FTX, but there’s a slight chance that might be the case, given what’s come to light with Nestcoin, even though Alameda Research, its investor, has less than 1% equity.
“We used the closely-associated exchange, FTX, as a custodian to store a significant proportion of the stablecoin investment we raised, i.e., our day-to-day operational budget,” said Bademosi in his tweet. “We were not undertaking any trading, but simply custodied our assets on the FTX exchange. While there are uncertainties, including the outcome of our assets held at FTX, we as a company have to adjust our plans, rethink our strategy and take steps to better position ourselves for the future.”
To that end, Nestcoin, which Bademosi launched last February to build, invest and operate web3 and non-custodial products for customers in frontier markets across Decentralized Finance (DeFi), media, digital art and gaming, has had to reduce its headcount. According to two people familiar with the matter, Nestcoin layoffs will affect at least 30 employees from sub-departments, including Breach, its media arm; Brunch, a group messaging app with a crypto wallet; and Metaverse Magma (MVM), a gaming DAO that raised $3.2 million at a $30 million valuation two months ago. The remaining employees will see their salaries slashed by as much as 40%, the people said. On the other hand, Nestcoin noted that its products are DeFi protocols & non-custodial; thus, it has never held customer funds, and “this incident has no impact on our customers financially.”
The rest of Bademosi’s tweet reads:
While this is a challenging time for us and the industry as a whole – we see this as a wake up call to focus on building a more decentralized crypto future where no one organization or person can amass enough power to influence a nascent industry that has the potential to do good.
In the past few days I’ve strengthened my resolve and remain committed to “doing crypto” in line with its true spirit and founding ethos.
At Nestcoin we have a renewed sense of purpose — we realize that for crypto to truly go mainstream, we must accelerate the transition to self custody by building compelling trustless crypt products. To succeed, we will remain relentless, resourceful and flexible as we navigate these hard times.
This is a developing story…