He noted that Midas’s DeFi portfolio sustained $50 million in losses this spring, which represented one fifth of the $250 million worth of assets they had under management. Then, following the collapse of FTX and Celsius, the platform saw more than 60 percent of its assets under management withdrawn.
Levin said: “Based on this situation and current CeFi market conditions, we have reached the difficult decision to close the platform.”
Moving forward, the company has said that it intends to concentrate on a new project related to centralized decentralized finance, or CeDeFi. The project will reportedly be fully transparent and on-chain, and it is being developed with the aim of providing an improved experience for investors.
Deposits and swaps were disabled yesterday, and withdrawals will be disabled for a period of time while they make adjustments. They're aiming to subtract 55 percent from user balances that are held in stable coins, ether and Bitcoin and compensating for the adjustment in Midas tokens that users can swap for tokens from its new project.
He added: “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.”
In his post, Levin outlined some of the problems the company has faced. They experienced significant growth between the fourth quarter of last year and the first quarter of 2022, when their business model was focused on DeFi yields. During that time, their assets under management grew by 15 times, which forced them to restructure their portfolio and diversify into a range of investments. When they determined they could no longer sustain the yield provided to users in February, they reduced the rates.
Then came the $50 million losses in spring. In May, they took steps to recover losses, such as a full de-risking of their portfolio and the development of models such as CeDeFi. Unfortunately, the events involving FTX, Celsius and LUNA then made it impossible for them to sustain a fixed-yield model.
The extensive withdrawals recorded on their platform as a result of the insolvency of FTX and Celsius, combined with the reduced yield opportunities seen on the market, led to the current situation where they cannot cover daily payouts to their users.
Levin closed his post by vowing to do his best to ensure that those who lost money can recoup those losses in the new project.
FTX’s spectacular failure has led to several lawsuits. This week, a group of FTX customers filed a class action lawsuit against the exchange and former executives such as Sam Bankman-Fried. The suit, which was filed in the U.S. Bankruptcy Court of Delaware, is pursuing a declaration that FTX’s digital assets holdings belong to its customers.
The failed cryptocurrency exchange barred withdrawals last month and then filed for bankruptcy following a rush of customers trying to pull their holdings from the exchange as its finances were called into question. Bankman-Fried is now facing charges from what one federal prosecutor has termed a “fraud of epic proportions”.
The proposed class seeks to represent more than a million customers of FTX in the U.S. and abroad. The disgraced crypto firm is also facing a slew of other civil lawsuits related to fraud, deception, theft and other crimes, in addition to probes that have been launched by the Department of Justice, the Securities and Exchange Commission and several other regulators.
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