In Today's Email:
- 📉 The DeFi Scandal
- 💵 Funding Friday
Drama in DeFi
Wanna hear about the scandal?
Milk Road is like a True Crime episode.
Here’s the setup:
A crypto project launches. It has a cute name, mysterious founders, and people jump on board, speculating that this might be the next big thing.
But…what happens when the “mysterious founder” turns out to be a known criminal (with a history of financial fraud)? And now is the CFO controlling a the largest treasury in all of crypto (~$1B)
Well.. We found out today.
Here’s the summary of what went down for those who are out-of-the-loop
1/ It starts with a community of people called the Frog Nation (go click that link and listen to their anthem by Agatha Cryptie).
2/ They pride themselves on building projects without using VC funding
3/ They built 3 DeFi tools that together that were once valued as high as $5B (now they're valued at $800m)
- Abcadabra Money (aka SPELL): A borrowing/Lending App
- Popsicle Finance (aka ICE): A Decentralized Hedge Fund
- Wonderland (aka TIME) : “Non-Pegged” Stablecoin (backed by assets in the treasury, not USD)
4/ Their vision was simple. All 3 protocols would grow and work together and everyone who backed them would have so much magic internet money they wouldn’t know what to do with it.
No outside VC money so no one could control them or tell them what to do.
It was a permissionless, open financial community built by the frogs, for the frogs
5/ Today, it all came crashing down.
6/ The CFO of the project who goes by “Sifu” (nobody knew his real name) was revealed to be a criminal known as Michael Patryn
7/ His history is checkered:
- Got arrested for identity theft - for his role in a scheme to traffic stolen credit cards and identities
- He Helped launch QuadrigaCX, the Canadian crypto exchange, where ~$180M in customer funds “were lost” after the founder, who was the only person who had access to the funds, “suddenly died” during his honeymoon in India
- Known to dabble in the ponzi scheme community online
8/ This week, a blockchain researcher publicly came out with this information - and people immediately started pulling money out of the project, and it’s down 30% (that means $175m of value was wiped out of the project in one day)
9/ Frog Nation is sad today. And the damage might continue. DeFi projects are highly linked together. When a stablecoin like $MIM gets rocked, it is also being used in many other projects, which can cause a cascade of problems.
10/ If you want more, give this thread a read
To me - it’s a brutal reminder that some of the cool new aspects of crypto (projects launching with anonymous founders and getting massive crowd funding) cuts both ways if it’s in the wrong hands.
Like Mad Eye Moody, we preach constant vigilance! at the Milk Road.
This tweet by DCInvestor sums up the risks with new DeFi projects:
$800M of funding was announced this week for crypto companies. Yezus.
- FTX raised $400m, best part is their founder, Sam Bankman Fried, is trying to give away all his money to charity
- CoinTracker raised $100m to help you do your crypto taxes (led by Initialized) and a ton of my friends recommend them for your taxes (our favorite thing)
- SuperDAO raised $10.5m to help spin up DAOs fast and they have this dope directory of over 650 DAOs
- BreederDAO raised $10m to make in-game digital assets for other games, kinda like how there are factories that make physical goods, but now they’re doing it for digital
- We have a full spreadsheet here with everything from the week!
Earlier this week, we asked 10 Crypto Whales what they are buying & selling during this bear market and turned it into an action packed PDF for you. If you missed the first 4 answers, you can get em here.
Over 1,000 people spread the gospel about the Milk Road - and if you emailed us your screenshot, you will be rewarded with the PDF of their answers in your inbox by this weekend
And if you haven't done it yet, just refer 1 person using your custom link below and we'll send it your way
- Ben "Just Dao it" Levy and Shaan "it's the weekend" Puri
What'd you think of today's email?
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