Part of BlockTower's funds were stolen. Will MakerDAO collapse?
BlockTower was hacked, but MKR quietly surged.Authors: Luccy, Sky, BlockBeats
On May 15, Bloomberg reported, citing informed sources, that the main hedge fund of BlockTower Capital has been hacked, with some funds depleted and currently unaccounted for; the hacker has not yet been caught.
It is reported that BlockTower Capital has hired blockchain forensic analysts to determine the cause of the stolen funds and recently informed its limited partners about the theft. However, BlockTower declined to comment on the hacking incident, and its Chief Information Officer and founder, Ari Paul, has not yet made any statements regarding the matter.
What is the relationship between BlockTower and MakerDAO?
BlockTower Capital was founded in 2017 and has invested in companies including non-fungible token developer Dapper Labs, gaming studio Sky Mavis, and the failed TerraUSD stablecoin creator Terraform Labs. According to data provider PitchBook, the company manages $1.7 billion in assets.
BlockTower Capital focuses on investments in RWA credit assets. In January of this year, two executives from BlockTower Capital established a new crypto asset investment company, Neoclassic Capital, with Goldman Sachs, focusing on derivatives, real-world asset tokenization, entertainment, gaming, and social sectors.
Among the RWA projects initiated by BlockTower Capital, the most notable is BlockTower Andromeda, whose executing entity, the TACO Foundation, is governed by MakerDAO.
Related article: "Overview of MakerDAO's Popular RWA Projects, Analyzing the Trading Architecture for Capturing Off-Chain Assets in DeFi"
The TACO Foundation was established in 2022, and by the end of that year, the governance actions bundling eight proposals executed by MakerDAO were all approved by community votes, one of which included launching the BlockTower real-world asset Vault. According to Article 4.16 of the foundation's Articles of Association, the foundation's Director must make any resolutions or exercise any rights based on MakerDAO's governance votes (MakerDAO Resolutions).
As the investment advisor for BlockTower Andromeda, BlockTower Capital has signed an investment advisory contract with the TACO Foundation, responsible for managing the funds of various accounts of the TACO Foundation and making investment decisions. MakerDAO treats the TACO Foundation as a legal entity to fulfill off-chain investment-related matters, separating investment decisions from asset custody in traditional finance to ensure risk control and compliance.
BlockTower's RWA structure, image source from Web3 Xiaolu
In addition to BlockTower Andromeda, the TACO Foundation also operates the BlockTower S3/S4 credit asset RWA project with a management scale limit of $150 million.
One of the largest RWA projects by MakerDAO
The RWA narrative has always been the narrative of MakerDAO, and U.S. Treasury bonds seem to have become one of MakerDAO's main targets.
On September 8, 2023, the MakerDAO community suggested considering allocating $100 million to develop tokenized U.S. Treasury bill (T-Bill) products, including T-Bills such as Flux fDAI as collateral; frictionless products like Maple Cash USDC; and long-term products like supported financial bIB01 and bIBTA.
Since 2022, MakerDAO has been continuously increasing its RWA assets. In October of that year, MakerDAO purchased $500 million in bonds. On June 21, 2023, MakerDAO again purchased over $700 million in U.S. Treasury bonds. According to DL News report, MakerDAO had expanded its physical asset investment portfolio to approximately $3.9 billion by the end of last year, primarily consisting of U.S. Treasury bonds.
Therefore, BlockTower Andromeda, under the execution of the TACO Foundation, has also turned its attention to U.S. Treasury bond investments and is continuously increasing its RWA assets through BlockTower Andromeda. According to Makerburn data, BlockTower Andromeda is currently one of the largest RWA projects by MakerDAO.
Will there be a blow-up?
Currently, MakerDAO has raised billions of dollars in RWA assets through various projects, with BlockTower accounting for nearly 1/10 of that. If MakerDAO does not misappropriate user assets for other purposes (such as staking arbitrage) like FTX did, the 1/10 amount of funds should not fundamentally affect MakerDAO's solvency.
This situation requires MakerDAO to address how to replenish this 1/10 of user assets. If MakerDAO's profit portion exceeds this 1/10 and is willing to replenish it, this situation could turn into a positive one for MakerDAO. For the price of MKR, this is a bearish signal, although it does not rule out the possibility that MakerDAO itself is releasing bearish news to offload.
According to TradingView data, as of the time of writing, the price of MKR experienced a brief surge, rising from $8.51 in the morning to $3.41 in the afternoon, an increase of $600.
Currently, neither BlockTower nor MakerDAO has made any statements regarding the theft incident, and BlockBeats will continue to track developments related to the event.
