Midas Investments announced the closure
Midas Investments’ CEO issued a statement on December 27 announcing the platform’s closure due to a lack of liquidity. Midas was making money through DeFi protocols.
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What is Midas Investments?
Midas Investments is a custodial investment platform that focuses on passive income generation. The company is registered in Saint Vincent and the Grenadines under the name Midas Alpha LLC, as a virtual asset management service. They claimed to be regulated and accessible to users in the United States, but their link to the regulatory document is no longer active. Fireblocks were used to secure client funds, and the team provided monthly reports.
Midas positioned itself as CeDeFi, which is the combination of algorithm-enhanced DeFi earnings with the simple management of CeFi. The developers claimed that in the absence of deposit blocking of funds, this combination would provide the highest level of profitability.
When compared to other platforms, Midas offered incredibly high yields in various cryptocurrencies like BTC, ETH, USDT, and others, allowing you to swap assets directly on the platform. In addition to the standard yield, the user could activate the Midas Boost feature, which increased the interest based on the user's level. The return at the Midas Boost underlying level as of the close is shown below. The Midas token could be used to raise the level.
Midas Token: What is it?
Midas Token is Midas Investments' native token that runs on the Ethereum blockchain. The maximum supply is 5 million tokens. Hacken has verified the token's smart contract. It was available for purchase at Uniswap or Midas Investments, allowing you to profit from the token right away.
When Midas Boost was activated, profits were accumulated in Midas tokens, and holding them on the platform allowed a user's level to be upgraded. The profitability of the base level was similar to that of the standard level, but if the Midas tokens exceeded 20% of the total value of all assets, the user received the maximum diamond level. This was supposed to boost the token's value and price. Other platforms for passive income, like Nexo, have a similar system. This shouldn't involve a lot of risks with proper risk management and actual positive returns.
Midas Investments established a token buyback and burn system, as well as a growth fund in which tokens were held for various purposes.
What exactly happened?
The company's financial records indicate that losses totaling $50 million, or 20% of the investment portfolio, occurred in the spring of 2022. The primary causes of the shortage are the general decline in the value of the DeFi portfolio and the failure of the Ichi protocol last spring. Any ties to Luna are denied. Due to the collapse of FTX, users withdrew more than 60% of the platform's funds in the fall. Thus, it completely destroyed the fixed-income model. Only employees with a high level of access were aware of this information.
In an apparent effort to balance the portfolio, the team has been actively lowering rates of return since February and attempting to implement a variety of new profit-generating strategies. However, it didn’t help.
What is going to happen next?
The deficit has a final value of $63.3 million. This is 55% of the obligations as a percentage, but the platform did not fully halt withdrawal of funds, but instead established certain withdrawal conditions.
1) Balances in BTC, ETH, and stablecoins will be adjusted by 55% in addition to historical earnings (all earnings made since registering on the platform).
2) Other assets will not be adjusted, except for the deduction of historical earnings.
3) Balances less than $5,000 will not be adjusted, except for the deduction of historical earnings.
4) Asset adjustments will be compensated in Midas token, which can also be withdrawn from the platform. The company will no longer provide liquidity for the token on DeFi exchanges.
5) Midas tokens will be swapped in the future for the tokens from a new project.
The CEO discusses the new project with optimism, mentioning the implementation of updated strategies and ideas. For instance, the first platform he suggests would be the development of an online treasury that would enable regular users to issue tokens backed by collateral in the form of USDT, BTC, or ETH.
Owners of Midas tokens will receive certain benefits from the new project, including profitability from the protocol, growth of the platform, and an increase in market capitalization.
“In an ideal world, investors would hold both the Midas token and the token of the new project, receiving revenue from the protocol as well as upside from the functional asset,” says Iakov Levin, CEO of Midas Investments.
If the new project is implemented successfully, users of Midas will be able to make up for their losses.
Conclusion:
Small companies are failing too, particularly those that don't manage risks well, as a result of the market crash, the failure of FTX, and other major players. Diversify your risk by distributing your assets across multiple platforms. Furthermore, keeping assets in a personal wallet is preferable if you plan to invest for a long time.
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