Capital markets News

Citi, Nasdaq-backed enterprise blockchain startup Symbiont enters Ch11 bankruptcy

chapter 11 bankruptcy

Symbiont, the U.S.-based enterprise blockchain startup, filed for Chapter 11 bankruptcy at the start of the month. The holding company is backed by the likes of Citi, Nasdaq Ventures and Broadridge, with Vanguard as one of its biggest clients. As of the middle of last year, it had raised $43 million in funding.

In December 2021 it went into production with a solution that automatically calculates margins for foreign exchange (FX) forward contracts, one of the solutions it developed in conjunction with Vanguard. It also created a blockchain platform for private market securities in association with Nasdaq and another for asset-backed securities. 

One of Symbiont’s biggest projects is with Lewis Ranieri, who popularized mortgage-backed securities. It involved creating a shared data solution to be used by the mortgage servicing industry, reaching the minimum viable product stage mid-last year. CEO Mark Smith claimed it would be the single largest blockchain application ever deployed with hundreds of thousands of lines of smart contract code.

Smith has a clear vision for Symbiont to address the inefficiencies in capital markets using blockchain by creating native golden records of assets on the Assembly blockchain. However, he believes the blockchain layer could become commoditized, so the company focused on developing vertically integrated solutions with its smart contract language.

The bankruptcy trigger 

According to the bankruptcy filing, the trigger was the inability to repay a loan from LM Funding secured on Symbiont’s assets and due on December 1 this year. LM Funding is a listed specialist lender and also a Bitcoin miner. Symbiont entered into a loan agreement on December 1, 2021, drawing down $2 million of a $3 million facility at a rate of 16%.

We suspect the purpose of the loan may have been to bridge an awaited payment over a legal case. Last year Symbiont won a lawsuit against IHS Markit-owned IPREO with damages of up to $78.9 million. Before IHS Markit acquired IPREO, Symbiont had a joint venture with IPREO to address the secondary market in syndicated loans. 

The judge ruled in favor of Symbiont in August 2021. However, IHS Markit appealed, hence the likely reason for the loan. On December 28, 2021, the companies settled and Symbiont was paid $53 million, according to the IHS Markit annual report.

The company will publish more details regarding the bankruptcy later this week. 

Apart from the FTX debacle, two major DLT initiatives have shuttered in the last month. The Australian Securities Exchange (ASX) pulled the plug on its replacement post-trade system CHESS. And Maersk announced it was closing its Tradelens shipping initiative with IBM. This follows the June winding down of the bank-backed trade finance platform

Hat tip to Coindesk for first reporting the Chapter 11 filing.