The most successful crypto funds have taken a hands-on approach with the founders they work with. But when it comes to digital assets, that too easily coincides with a hands-on approach to liability.
Three venture capital investors have been named in a lawsuit lodged last week against crypto token exchange Uniswap and its founder due to, not only their ownership stake in the company, but also their alleged deep involvement in building out and developing Uniswap, which is a decentralized token exchange protocol built on Ethereum blockchain that was founded in 2018.
Nessa Risley, a North Carolina resident who claims to be a Uniswap customer, is accusing the exchange of being an unregistered exchange and brokerage and failing to address the “rampant fraud” occurring on its platform, according to the lawsuit, which was filed in a federal New York court last week.
Three of Uniswap’s VC investors—Paradigm, Andreessen Horowitz, and Union Square Ventures—were allegedly “intimately involved” in developing and promoting the exchange, writing smart contracts, and overseeing operations, among other things, which makes them liable for what happens on the platform, the lawsuit asserts.
“These allegations are meritless and the complaint is riddled with factual inaccuracies. We plan to vigorously defend against this suit,” a Uniswap Labs spokesperson said in a statement. An Andreessen Horowitz spokesperson declined to comment, and representatives for Paradigm and Union Square Ventures didn’t respond.
Risley’s grievances stem from a series of schemes that the lawsuit alleges have repeatedly taken place on the Uniswap platform, such as “rug pulls,” where a new issuer will place a new token into a liquidity pool, then prematurely withdraws their coins, or “pump and dump schemes,” where issuers will send new tokens to themselves, loudly tout them on social media, then dump their holdings and leave with the profits.
Uniswap has acknowledged the problems, the lawsuit claims, but has allegedly avoided putting in the effort required to stop them due to it making fee revenue from every transaction.
Uniswap and its VCs “have and continue to turn a blind eye to the fraud and do nothing to stop it, because those in control of Uniswap profit handsomely from such conduct,” the lawsuit alleges.
With so much capital sloshing around, the venture capital model has evolved over the last two decades—as firms need to offer something beyond pure cash to get a founder’s attention. Firms like Andreessen Horowitz were early adopters and developers of this value-add model, hiring slews of support staff to work with their portfolio companies post-investment.
It shouldn’t be surprising that this comes with an extra layer of risk. But hey—that just comes with the territory. And it certainly doesn’t seem to be scaring anyone away. Limited partners are throwing billions of dollars at venture capitalists who will put their money to work in crypto. It’s unlikely a lawsuit will impede anyone’s plans.
Keep your enemies close… It wouldn’t be a crypto event without a little bit of drama, and the Bitcoin 2022 Conference delivered just that. Last week, Miami Mayor Francis X. Suarez unveiled a 3,000 pound “Miami Bull” statue last week to showcase its efforts at becoming the epicenter of crypto and fintech. The bull is what the city describes as a “modern interpretation” of Wall Street’s Charging Bull in New York, complete with laser eyes. Later on, VC and Paypal founder Peter Thiel called out the “enemies” of Bitcoin in what appears to have been a rather heated keynote presentation. Apparently, Warren Buffet is “enemy No. 1” and a “sociopathic grandpa from Omaha.” Yikes.
The Saudi coffers… Just six months after he left the White House, former senior advisor and President Donald Trump’s son-in-law Jared Kushner received a $2 billion investment from Saudi Arabia’s primary sovereign wealth fund for his newly organized private equity firm, according to a new investigation from the New York Times. The investment was accepted despite a slew of concerns from the fund’s advisers. Kushner had defended Crown Prince Mohammed bin Salman within the Trump Administration after the murder of Washington Post columnist and Saudi royalty critic Jamal Khashoggi—raising questions as to whether the investment was payback for his support or a potential bid “for future favor” if Trump seeks re-election. “Affinity, like many other top investment firms, is proud to have PIF and other leading organizations that have careful screening criteria, as investors,” a spokesman representing Kushner told the Times in response. A Saudi fund spokesman declined to comment. You can read more here.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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VENTURE DEALS
- Epic Games, a Cary, N.C.-based video game and software developer and publisher, creating games such as Fortnite, raised $2 billion in funding from Sony Group Corp and KIRKBI.
- Enerkem, a Montreal-based company producing renewable fuels and chemicals from waste, raised $100 million in funding from Repsol and others.
- Viz.ai, a San Francisco-based disease detection and care coordination platform, raised $100 million in Series D funding led by Tiger Global and Insight Partners and was joined by investors including Scale Ventures, Kleiner Perkins, Threshold, GV, Sozo Ventures, CRV, and Susa.
- CertiK, a New York-based web3 and blockchain security firm, raised $88 million in Series B3 funding led by Insight Partners, Tiger Global, and Advent International and was joined by investors including Goldman Sachs, Sequoia, and Lightspeed Venture Partners.
- Ansa Biotechnologies, an Emeryville, Calif.-based DNA synthesis service for synthetic biology research, raised $68 million in Series A funding led by Northpond Ventures and was joined by investors including RA Capital, Blue Water Life Science Advisors, Altitude Life Science Ventures, Fiscus Ventures, PEAK6 Strategic Capital, Carbon Silicon Ventures, Codon Capital, Mubadala Capital, Humboldt Fund, Fifty Years, and Horizons Ventures.
- Eleanor Health, a Waltham, Mass.-based addiction and mental healthcare provider, raised $50 million in Series C funding led by General Catalyst and was joined by investors including Warburg Pincus, Town Hall Ventures, Northpond Ventures, and Rethink Impact.
- Vytalize, a Hoboken, N.J.-based care platform for seniors, raised $47 million in Series B funding led by Enhanced Healthcare Partners and was joined by investors including Kittyhawk Ventures, Kawn Ventures, North Coast Ventures, and others.
- Thunkable, a San Francisco-based no-code mobile app development platform, raised $30 million in Series B funding led by Owl Ventures and was joined by investors including Lightspeed Venture Partners, NEA, PJC, Sky9 Capital, and others.
- Landline, a Fort Collins, Colo.-based flight transportation platform, raised $28 million in Series A funding led by Drive Capital.
- Kumo, a San Francisco-based data-focused SaaS A.I. platform, raised $18.5 million in Series A funding led by Sequoia Capital and was joined by investors including A Capital, SV Angel, and other angels.
- Leaft Foods, a Lincoln, New Zealand-based plant-based protein producer, raised $15 million in Series A funding from investors including Khosla Ventures, NBA athlete Steven Adams, investor Ngāi Tahu, and ACC via their Climate Change Impact Fund.
- LawVu, a Tauranga, New Zealand-based software platform for in-house legal teams, raised $13.5 million in Series A extension funding led by Insight Partners and AirTree Ventures.
- Branch, a New York-based office furniture startup, raised $10 million in Series A funding led by Springdale Ventures and was joined by Maywic, Group RMC, Agya Ventures, and others.
- Pangea Biomed, a Tel Aviv-based precision oncology biotech company, raised $7 million in seed funding led by NFX.
- Regulatory Genome Development, a Cambridge, U.K.-based machine-readable regulatory content provider, raised $6 million in seed funding led by Evolution Equity Partners and was joined by investors including AlbionVC, Cambridge Enterprise, and Mastercard.
- Crurated, a London-based membership wine community, raised €3 million ($3.3 million) in funding from investors including wine expert Chris Van Aeken, Dip WSET, and others.
- Dragonfly AI, a London-based predictive visual analytics platform, raised £3 million ($3.3 million) in Series A funding led by Guinness Ventures and was joined by investors including Downing Ventures and Capita PLC.
- Ghost Financial, an Austin-based financing and business services platform for ghost kitchens and restaurants, raised $2.5 million in pre-seed funding from investors including HOF Capital, 305 Ventures, Hustle Fund, Active Capital, and others.
PRIVATE EQUITY
- Thoma Bravo acquired SailPoint, an Austin-based enterprise identity security company, for $6.9 billion.
- Goldman Sachs acquired NN Investment Partners, a The Hague, Netherlands-based asset manager, for $1.9 billion.
- Carlyle agreed to acquire Abingworth, a London, San Francisco, and Boston-based life sciences investment firm. Financial terms were not disclosed.
- Highbourne Group, a portfolio company of H.I.G. Capital, acquired Plumbworld Limited, an Evesham, U.K.-based e-commerce bathroom, kitchen, plumbing and heating products provider. Financial terms were not disclosed.
- Perforce Software, backed by Francisco Partners and Clearlake Capital Group, agreed to acquire Puppet, a Portland, Ore.-based infrastructure automation software platform. Financial terms were not disclosed.
- Prather Capital Partners acquired QDP Technologies, a Ramsey, Minn.-based components and assemblies machine shop. Financial terms were not disclosed.
- Thoma Bravo acquired a majority stake in UserZoom, a San Jose, Calif.-based user experience research and testing company. Financial terms were not disclosed.
EXITS
- Interros Capital, agreed to acquire Rosbank, a Moscow-based bank, from Societe Generale for $3.3 billion.
- Bioventus acquired CartiHeal, a Kfar Saba, Israel-based medical implant device company for cartilage and osteochondral defects in traumatic and osteoarthritic joints, from Peregrine Ventures for $500 million.
OTHER
- Constant Contact acquired Vision6, a Brisbane, Australia-based email and SMS marketing platform. Financial terms were not disclosed.
- HelpSystems acquired Terranova Security, a Quebec-based global phishing simulation and security awareness training. Financial terms were not disclosed.
- Sykes Holiday Cottages acquired Forest Holidays, a Moira, U.K.-based holiday cabins operator. Financial terms were not disclosed.
- Validity acquired MailCharts, a New York-based email campaign planning platform for marketing teams. Financial terms were not disclosed.
IPOS
- ClassPass, a New York-based exercise subscription service owned by Mindbody, plans to go public in 2023, according to the Financial Times.
- Intrinsic Medicine, a Seattle, Wash.-based preclinical-stage therapeutics company that leverages HiMO molecules as new medicines to treat patients, filed for an IPO. The company posted a net loss and comprehensive loss of $12 million in 2021 and has yet to post revenue.
- Tiket.com, an Indonesia-based online travel booking company, is in talks to merge with Blibli, an Indonesian-based e-commerce platform, ahead of the company’s public offering in Indonesia, according to Bloomberg.
PEOPLE
- Aurelius, a Munich-based asset manager, hired Fearghus Arnold as practice manager of sales and marketing, Alex McGregor as practice manager of procurement, Jhanzeb Choudhary as operations manager, and Leo Alldread as accounting manager. Formerly, Arnold was with ECI Partners, McGregor was with Procura Consulting, Choudhary was with Sainsbury’s, and Alldread was with Blick Rothenberg.
- Traub Capital Partners, a New York-based private equity firm, hired Nathan Mullaney as vice president and Richard Lenskold as associate. Formerly, Mullaney was with Tengram Capital Partners and Lenskold was with Barclays.
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