Nestcoin, a company building, operating, and investing in web3 applications, has announced that it plans to cut a large proportion of its workforce after being caught up in the FTX collapse.
In a letter to investors, Yele Bademosi, co-founder and CEO at Nestcoin stated that it held a “significant” portion of the stablecoin investment it used for day-to-day operations on FTX.
“We used the closely-associated exchange, FTX, as a custodian to store a significant proportion of the stablecoin investment we raised, i.e., our day-to-day operational budget,” said Bademosi. “We were not undertaking any trading, but simply custody of our assets on the FTX exchange. While there are uncertainties, including the outcome of our assets held at FTX, we as a company have to adjust our plans, rethink our strategy and take steps to better position ourselves for the future.”
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 $4 million on FTX, which represents nearly all the remaining funds it had raised, according to an investor referenced by the Financial Times.
According to several reports, companies with money stuck on FTX might get their money back depending on how much FTX’s assets are ultimately worth. From its 23-page bankruptcy filing, FTX has more than 100,000 creditors, with assets in the range of $10 billion to $50 billion and liabilities within the same range.
According to two people familiar with the matter, they told Techcrunch that the Nestcoin layoffs will affect at least 30 employees from sub-departments, including Breach, its media arm; Brunch, a group messaging app with a crypto wallet; and Metaverse Magma (MVM), a gaming DAO that raised $3.2 million at a $30 million valuation two months ago.
The remaining employees will see their salaries slashed by as much as 40%, the people said. On the other hand, Nestcoin noted that its products are DeFi protocols & non-custodial; thus, it has never held customer funds, and “this incident has no impact on our customers financially.”