Is the so-called investment actually an over-the-counter transaction? The Block once again published an article revealing the "investment" behavior of DWF Labs
Original author:Ryan Weeks, Yogita Khatri & Frank Chaparro| The Block
Original Compilation: Felix | PANews
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DWF Labs has grown from obscurity to become one of the most active investors in crypto this year.
But behind the boom, some in the industry see red flags in its opaque investment structure and habit of moving token investments to exchanges.
DWF disputed this, saying there was nothing wrong with its approach.
DWF Labs has soared up the list of the most active investors in the crypto industry, causing both concern and discontent.
In six months of turmoil in an industry rife with scandals, bankruptcies and a crackdown by U.S. regulators, DWF Labs has gone from obscurity to the spotlight. Block Pro’s deal data shows the company invested $232 million in 25 funding rounds, 18 of which had DWF as the sole investor, while the company itself says it has committed at least $100 million to more than 100 projects.
It's not just DWF's payouts that have sparked speculation about its investment, but many of the VC deals appear to be opaque and non-standard, drawing comparisons between DWF and Alameda Research, which collapsed last year. Alameda Research is a hedge fund and market maker founded by former FTX CEO SBF. In its defence, DWF responded to all questions raised against it.
DWF Labs was founded in 2018 by managing partner Andrei Grachev - CEO of Huobi Russia and several crypto trading firms. DWF Labs describes itself online as a leading "digital asset market maker and Web3 investment firm" with operations in Singapore, Switzerland, the United Arab Emirates and the British Virgin Islands. It is an affiliate of Digital Wave Finance, a little online entity that DWF Labs’ website describes as “one of the largest high-frequency cryptocurrency trading entities in the world, with over 40 top-tier exchanges spot and derivatives market transactions.”
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Questions from DWF Labs
At the heart of DWF’s concerns is the fact that startup token trading agreements are sometimes reported as venture capital investments, and DWF’s habit of transferring these tokens to exchanges so they can be sold.
"All these 'investments' you see are not actual investments," said a person with direct knowledge of DWF's business. “They’re OTC. They’re all token purchases. They’re OTC over a period of time.”
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The "Promise" of DWF LabsIn late February, for example, crypto privacy startup Beldex announced a $25 million deal with DWF. in an articleblog post
In the release, Beldex stated that DWF Labs will “commit to invest $25 million in research and development of the Beldex network and ecosystem.” However, in some reports on the deal, the word "commitment" was omitted, instead describing it as a direct financing exercise. A spokesman for Beldex said the money had actually been committed for two years.
Just this week, CryptoGPT announced that it has raised $10 million in Series A funding from DWF Labs, valuing the token at $250 million. However, the total investment so far is only $420,000, according to Dejan Erja, CryptoGPT co-founder and chief technology officer. Erja said DWF started investing last week and the remaining amount will be available within 285 days. As part of the deal, DWF Labs will also make a market for CryptoGPT’s GPT token.
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DWF's 'unwise' deal
Bainy Zhang (who goes by the pseudonym Hedgedhog on Twitter) founder of Fisher 8 Capital and eGirl Capital said, “The types of projects and amounts that DWF Labs invests in really don’t make sense to me.” Neither seems sensible. Presumably, the amount DWF invests in projects represents a significant portion of the token supply of those projects. For example, Beldex's $25 million is 5% of its fully diluted valuation, assuming DWF pays market rate.
Once public, such transactions can have a huge impact on the price of the project token. Within days of announcing the deal with Beldex, the price of its BDX token jumped about 50 percent, from $0.04 to $0.06, according to CoinGecko data. It is now around $0.057.A project called Tomi, which aims to build an alternative platform to the internet, said it raised $40 million from DWF Labs on March 22. In the short term, its token price surged from $1.3 to $4.3 before falling to its current price of around $2.58. Covering DWF Labs in The BlockPrices also jumped after buying $10 million worth of tokens issued by crypto infrastructure project Orbs.
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"I don't see anything wrong"
When asked in an interview whether the DWF Labs investment was an upfront venture capital check or an over-the-counter token deal, Grachev made no mistake.
Continuing the discussion of DWF moving its token investments to centralized crypto exchanges, it’s not hard to find people citingData on the chainData on the chain
to highlight this practice and wonder if this means DWF is selling tokens.
When asked about the changes, Grachev dismissed claims the company was selling for profit. Instead, he said DWF found it safer to leave tokens on an exchange than use an on-chain wallet.
“We transfer tokens to exchanges, but we never sell them,” Grachev said in an interview. “If we send tokens to an exchange, it doesn’t mean we’re going to sell those tokens immediately or in the near future. We’ve been moving tokens to exchanges because, for us, storing tokens On the exchange is a more convenient way to manage inventory.”TwitterIn the post, he added: “Crypto market makers must be prepared for emergencies and extreme volatility, and have available inventory of tokens and stablecoins with the aim of meeting 24/7 liquidity.”
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Funding of DWF
DWF's big spending has also left some in the industry wondering where its money is coming from. DWF Labs has no outside investors and has been funded through deal activity since the company was founded in December 2018, Grachev said. Still others are cryptocurrency-based loans.In addition to running DWF Labs,Grachev's LinkedIn profile
He has also held several other positions over the past five years — all involving trading and cryptocurrencies, the report reveals.
From 2018 until last June, he served as CEO of a high-frequency trading firm called VRM.Trade. From May 2018 to July of the following year, he worked as vice president of trading at a Moscow-based company called Racib. Before that, he also ran another cryptocurrency company called Crypsis Blockchain Holding, which was also based in Moscow, according to LinkedIn.
Starting in September 2018, Grachev also served as the CEO of Huobi Russia, an offshoot of the Chinese cryptocurrency exchange, for a year. Huobi Russia closed in 2020. “Due to strategic adjustments within the Huobi Group, the two parties reached an agreement to terminate this partnership,” a Huobi spokesperson said.Although Grachev, in an interview with The Block and insocial media
The Internet is keen to push back against claims of wrongdoing, but many in the crypto industry remain concerned.
“At a time when most VCs are tightening their purse strings, DWF is investing tens of millions of dollars a week in OTC token deals,” said angel investor and former chief marketing officer Matthew Howells-Barby. “Something feels wrong. .”
