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Midas Investments shuts down, taking over 55% of customers' funds
(Kitco News) -
Midas Investments, the hybrid centralized/decentralized (CeDeFi) cryptocurrency platform, announced Tuesday that they will shut down operations as of Dec. 27 and will deduct 55% from most customer accounts to “balance assets and liabilities.”
“I am writing to you today with a heavy heart to announce that the Midas platform is closing down,” wrote Iakov Levin, CEO of Midas Investments, who also goes by ‘Trevor,’ in a Dec. 27 blog post.
Levin said that in the spring of 2022, the advent of the crypto winter saw Midas’ DeFi portfolio lose $50 million of its $250 million market value, or 20%. Then, following the bankruptcy of Celsius on Jul. 13 and FTX on Nov. 11, “the platform experienced over 60% of AUM being withdrawn, creating a large asset deficit” of $63.3 million, based on assets of $51.7 million against liabilities of $115 million in BTC, ETH and stablecoins.
“Based on this situation and current CeFi market conditions, we have reached the difficult decision to close the platform,” Levin wrote.
Levin wrote that his team spent the past eight months trying to find ways to balance their assets and liabilities, including “launching CeDeFi strategies, seeking fundraising, and exploring opportunities with DeFi protocols. Despite these efforts, the extensive withdrawals due to the insolvency of Celcius and FTX, coupled with reduced yield opportunities on the market, made it impossible for us to cover daily payouts to users due to the assets deficit.”
Levin said that only Midas’ C-level executives knew about the asset deficit, and the community, marketing, support, IT, and platform teams were not aware. “The asset deficit was caused by the long-term risk of DeFi investment, the instability of our business model after the loss of assets, and the illiquidity of the Midas token,” he said.
Midas also outlined its plan to balance assets and liabilities, saying that as of Dec. 27 at 11:00 AM UTC, deposits and swaps have been disabled on the platform. They then will deduct 55% of the balances of users with over $5000 in their accounts, along with the earned rewards of all users, and leave the balance in users’ accounts. “Withdrawals will be disabled for 2-3 hours while we ensure that calculations and balance adjustments have been made correctly,” Levin wrote. “Once this is done, you will be able to withdraw the remaining assets from the platform, with any rewards earned being deducted from your balance.”
Levin also said that users would be issued MIDAS tokens equivalent to the deductions as compensation, which will later be swapped for the tokens of Midas’ next project, which he then outlined.
“In January, Midas will focus on market research and prototyping for DeFi and CeDeFi business models, as well as creating prototype vaults and strategies and developing new investment processes,” Levin wrote. “In February, the team will continue with market research and begin investment traction, working on the development of a minimum viable product and engaging with DeFi protocols.”
Levin said that private tests of the product will be conducted in March, and in April, Midas plans to swap the current tokens for the new ones.
“The goal of the new project is to create a win-win situation by connecting competing protocols with liquidity and offering a simplified yield to a range of DeFi and CeFi audiences,” he said. “The first product will be a transparent, on-chain treasury that allows users to mint tokens backed by stablecoins, BTC, or ETH by depositing collateral in ETH.”
Levin held a series of three AMA sessions with Midas customers on YouTube this morning, and he began with a mea culpa.
“I know it was really hard for you guys, and I'm incredibly sorry that it came to this,” he said. “I am taking the responsibility and trying to explain what happened. I understand that it does not give you money back that you lost with Midas, I understand that you want to burn everything related to Midas now, and I obviously accept it.”
Levin said he was responsible for the vision and decision-making and he made “huge mistakes” as the CEO of Midas. “I was incompetent, and my team, we were incompetent in managing funds. We did not understand the impact of having […] $300 million that we got in March.”
Levin then began answering the submitted questions, which included harsh criticism and accusations from Midas customers about his decisions and the losses they caused. Among the most common questions posted to the AMA were why Midas converted many of their customers' stablecoins to the company's Midas token (MIDAS), which was trading around $29 before the shutdown and fell to $0.01 soon afterward, and whether Midas' senior management suffered the same losses as their customers.
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