Midas Shuts Down as Another Victim of FTX Collapse

Midas Investments, a cryptocurrency company from the decentralized finance (DeFi) ecosystem, has decided to shut down its operations after experiencing heavy losses due to the FTX exchange collapse. The decision was announced on Tuesday by Iakov 'Trevor' Levin, the CEO and Founder of the yield farming platform.

According to Levin's statement published on Midas' official blog, the company had $250 million in assets under management (AuM) in May 2022. However, the breakdown of the crypto market triggered by the collapse of Terra's UST stablecoin resulted in a $50 million loss.

Then, the November bankruptcy of the FTX exchange and the subsequent default of the Celsius lender caused panic among yield platform customers, leading to a withdrawal of more than 60% of AuM. Due to the asset deficit and the difficult macroeconomic situation, Levin and other Midas Investments representatives decided to cease the existing business.

"Over the past eight months, our team has been focused on identifying and capitalizing 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 Celcius and FTX, coupled with reduced yield opportunities on the market, made it impossible for us to cover daily payouts to users due to the assets deficit," Levin commented.

Midas has disabled the possibility of deposits and swaps. Additionally, withdrawals are temporarily blocked: the platform will deduct 55% from users' balances held in stablecoins, ETH and BTC, exchanging them for Midas tokens.

Additionally, Levin admits that key employees knew about the asset deficit, but the rest of the team was unaware. The problems were triggered not only by the collapse of FTX and Terra but also by the long-term risk of the DeFi market, the instability of the platform's business model and the lack of liquidity of its native token.

Midas Extends List of FTX Victims

The bankruptcy of the FTX exchange owned by Sam Bankman-Fried and the Terra ecosystem created by Do Kwon was followed by a series of popular cryptocurrency companies collapsing. The first of FTX's victims was the crypto lender, BlockFi.

Earlier in 2022, Three Arrows Capital, a cryptocurrency hedge fund, went bankrupt due to the Terra collapse. It was followed by two crypto lenders, Voyager Capital and Celsius Network, defaulting.

The series of bankruptcies deepened pessimism in the cryptocurrency market. It triggered a significant outflow of funds from centralized exchanges to self-custody wallets and worsened the mining industry's condition. Argo Blockchain, the publicly-listed miner, stood on the verge of bankruptcy but was rescued due to an investment and loan from a company owned by Mike Novogratz, Galaxy Digital.

New Business Soon for Midas?

Although the Founder of Midas has been forced to shut down his business, he is set to create a new project that will continue to develop the vision of CeDeFi, a connection between the worlds of centralized and decentralized finance.

"Despite the damage that was done by this event, this is the only way to move forward for Midas to build something relevant to this new market. We aim to focus on a new project that aligns with our vision for CeDeFi. This project will be fully transparent, on-chain, and built with the goal of offering a new and improved investment experience," Levin added.

The new business model is expected to guarantee a share of ETH revenues transferred to the Midas token. The team plans to reach a capitalization of $200 million over the next two years.

According to the roadmap, testing of the new product will begin in March, and Midas wants to replace the current tokens with the new ones in April.