Nestcoin, Nigerian crypto, NFT and gaming startup revealed on Monday that its operational funds raised from investors were trapped in FTX, Bankman-Fried’s crypto exchange collapse, announcing job cuts to ameliorate the financial challenges facing the startup.
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The communication from Nestcoin CEO reads;
“…last week’s event had an impact on us, as we held out assets (cash and stablecoins) at FTX to manage our operational expenses. …simply custodied our assets on FTX exchange” the statement partly reads.
An investor in crypto, gaming and digital art, Nestcoin raised $6.45mn in an early funding round, with backers that included Alameda Research, Bankman-Fried’s trading shop. The amount was the largest ever raised by a Nigerian start-up at such an early stage.
It held about $4mn on FTX, which represents nearly all the remaining funds it had raised, according to an investor who had been briefed by the company. The group declined to comment, but the investor letter said Nestcoin did not yet hold any client assets.
The issues at Nestcoin are the latest sign of the broad scale of the damage caused by the crisis at FTX, which was valued at $32bn and seen as one of the most regulation-friendly companies in an industry described by Wall Street’s top regulator as the “wild west”.
Nestcoin will cut at least half of its almost 100-strong staff as a result of FTX’s plight, according to current and former employees. Other employees are being offered a furlough scheme lasting eight to 10 weeks and will be paid on a per-needed basis. Those employees left at the company will take a pay cut of about 40 per cent, while chief executive Yele Bademosi will receive no compensation.
Nestcoin also sought to assure its investors that customer finances were safe, saying in the investor update that the products it had released “are DeFi protocols & non-custodial in nature and, as such, we have never held customer funds and this incident has no impact on our customers financially”.
FTX and Alameda Research invested in other African start-ups over the past year. Chipper Cash, a Kenyan-based remittance company, raised $150mn last year at a $2bn valuation led by FTX and unnamed investors.
Mara, another Kenyan crypto start-up, raised $23mn from Alameda, Coinbase and others. Mara said in May that it would become the “official crypto partner” of the Central African Republic, the small conflict-plagued nation of 5mn that adopted Bitcoin as legal tender earlier this year. In August, the country’s top court declared unconstitutional most of the schemes being run under the Bitcoin programme, including the purchase of citizenship.