Crypto Custodial Firm ‘Midas Investments’ Shuts Down After Suffering Huge Losses 

Crypto Custodial Firm ‘Midas Investments’ Shuts Down After Suffering Huge Losses 

The decentralised crypto investment platform shuts down after facing a liquidity crisis from the collapses of FTX, Celsius and Terra. Following the market events, customers withdrew 60% of the assets under Midas’ management within six months. 

CeDeFi (centralised and decentralised finance) crypto custodial investment platform Midas has announced it will be closing down operations following unrecoverable losses this year, as per a statement given by CEO and founder Lakov “Trevor” Levin in a blog post on December 27. 

In the announcement, Levin wrote that the moves came after Midas’ DeFi portfolio suffered a cumulative loss of $50 million during the bear market, which accounted for 20% of its $250 million worth of crypto assets under management (AUM). Following the collapses of FTX, Celsius and Terra, users withdrew 60% of AUM from the DeFi custodial platform over the course of six months, creating a large deficit for the company. 

Midas’ business model revolved around DeFi yields, offering users some of the highest yield rates in the market for their crypto assets. This saw the platform experience rapid growth during the crypto boom between Q4 2021 and Q1 2022, when Midas’ AUM increased 15 times over. According to the CEO, the rapid growth of assets under management forced the platform to restructure its asset portfolio and diversify its DeFi portfolio into almost every investment that was available in the market at the time. In February, to sustain the yield it offered to customers, Midas decided to lower its rates for the first time. 

However, the company’s investment portfolio suffered huge losses in the Spring’s bear market which affected the entire crypto and DeFi sector. Midas lost a combined $50 million in the market crash, of which $14 million was lost to Ichi Protocol, $15 million due to the portfolio position value of DeFi Alpha decreasing, $1.5 million due to a hack that occurred on Harmony token bridge, $10 million from paying users higher rewards in MIDAS token than what was being earned through DeFi, and $15 million from balancing MIDAS token sales on illiquid markets. 

Crypto Custodial Firm ‘Midas Investments’ Shuts Down After Suffering Huge Losses 

Trevor also noted that Midas’ self-build analytic balance sheet infrastructure was causing the price dynamic of altcoins listed on the exchange to create deficits in its balance sheet. For example, the DeFi portfolio held more FTM tokens than users had on Midas, causing $3 million in losses when FTM’s price changed. 

In response, the protocol introduced plans to fully de-risk its portfolio in order to recover the losses and prepare for the next bull market. The platform developed new investment business tools like CeDeFi for the purpose.

“Over the past eight months, our team has been focused on identifying and capitalising on opportunities to balance our assets and liabilities. This included launching CeDeFi strategies, seeking fundraising and exploring opportunities with DeFi protocols. Despite these efforts, the extensive withdrawals due to the insolvency of Celsius and FTX, coupled with reduced yield opportunities on the market, made it impossible for us to cover daily payouts to users to the assets deficits,” said the CEO. 

Moreover, the outflow of over 60% of assets held under management (AUM) made it impossible for Midas to sustain its fixed yield model. 

According to the blog post, the company’s total liabilities stand at $115 million, which includes Bitcoin (BTC), Ether (ETH) and stablecoins, while its assets are worth a total of $51.7 million, creating a total deficit of $63.3 million. Trevor Levin has promised to provide more information regarding Midas’ finances on a quarter-by-quarter basis in a YouTube video. 

On December 27, the platform disabled all deposits and swaps on its platform. Withdrawals were paused for several hours while the company ensured that calculations and balance adjustments were correct. Afterwards, Midas allowed users to withdraw remaining funds from the platform, minusing 55% from rewards earned in MIDAS tokens.  

The company also announced that it will be releasing a new project that will offer “scalable, on-chain, verifiable and tokenized CeDeFi” strategies for both CeFi and DeFi users. The new project will issue a token based on the Ethereum network in March 2023, targeting a market valuation of $200 million for the asset within two years. The company has promised that current MIDAS holders will be eligible to receive a share of the revenue, as well as an upside from the platform’s growth and market cap increase. 

Also Read Galaxy Digital Saves Bitcoin Miner Argo From Bankruptcy 

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