Nestcoin, a Nigerian crypto startup that builds, operates, and invests in Web 3 applications, has joined a growing list of firms impacted by the recent FTX collapse.
According to a letter shared by Nestcoin CEO Yele Bademosi on Tuesday, the company has part of its operational funds stuck on the FTX ahead of the latter’s bankruptcy filing.
Funds Stuck on FTX
Bademosi stated that the funds were part of the capital the startup raised from several investors, including FTX’s sister company Alameda Research in February. At the time, Nestcoin raised about $6.5 million in a pre-seed funding round.
The CEO noted that Nestcoin used FTX to custody a significant portion of the capital it raised at the time.
“We used the closely-associated exchange, FTX, as a custodian to store a significant portion of the stablecoin investment we raised — i.e., our day-to-day operation budget,” Bademosi said.
On November 11, FTX filed for Chapter 11 bankruptcy protection in the U.S. after it was hit by a liquidity crisis following reports that the company’s former CEO Sam Bankman-Fried (SBF) used customers’ funds to fund risky bets. According to reports, FTX has roughly an $8 billion black hole in its balance sheet and more than one million creditors.
Nestcoin to Reduce Workforce
As a result of FTX’s contagion, Bademosi noted that Nestcoin will have to adjust its plans, rethink its strategies and take several steps to better position the company for the future. Part of the plan includes laying off a significant portion of its workforce.
Per reports, Nestcoin will be implementing a 40% pay cut for the remaining employees at the company. Additionally, some employees will also be offered a furlough scheme of up to eight to ten weeks and paid on a per-needed basis.
“While this is a challenging time for us and the industry as a whole — we see this as a wake up call to focus on building a more decentralized crypto future where no one organization or person can amass enough power to influence a nascent industry that has the potential to do good,” Bademosi said.
