Crypto Due Diligence Startup Competing To Bring Transparency To The “Opaque” Industry

  • To date, the firm has conducted more than 30 asset manager reviews at the request of institutional investors, with more in the pipeline.
  • This is a change from the many layoffs that crypto firms have recently plagued with the precipitous market decline.

A due diligence startup focused on digital assets led by two veterans of traditional finance is one of the few companies in the space to grow its business thanks to an entrenched market downturn.

The London-based feat of Quentin Thom and James Newman has begun to conduct deep dives into crypto exchanges and other service providers, alongside the platform’s bread and butter to conduct due diligence on venture capitalists and blockchain hedge funds commissioned by deep-rooted institutions. investors intend to support such entities.

Quentin Thom of perfORM | Source: performORM

“It highlights an area that, rightly or wrongly, is considered opaque,” Newman told Blockworks.

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The startup is an opposing bright spot in an industry ravaged by layoffs, pay cuts and canceled executive positions to buffer their balance sheets in the wake of the implosion of the UST stablecoin and the shockwaves the demise of cryptocurrency lender Celsius has caused to soar. shoot. trading desks this month.

Thom — a former director of Deutsche Bank’s European prime brokerage division that serves traditional hedge funds — and Newman — who recently spent about a decade on due diligence for Barclays — have now conducted more than 30 asset manager assessments, to include more not to mention the growing numbers on the sell side, the co-founders told Blockworks. And they’re looking for staff, perhaps in a prime position to recruit talent seconded to other companies that are cutting back.

“It looks like a perfect storm,” Thom said of the market crash. “It’s such a good time, with ratings as high as they are now, to sell insurance and reinsurance to what should be a really excellent, interesting and dynamic industry to these institutions that are probably a little on their toes.”

Profile James Newman
James Newman of perfORM | Source: performORM

A number of recent reviews for major sponsors have led these lenders to issue checks to crypto asset managers, though recent events have made them reluctant to do so, Thom said, refusing to name the entities involved.

The growth comes on the heels of Celsius and Voyager, the cryptocurrency lender facing deep losses after its hundreds of millions of dollars in margin calls to the industry’s lone star – and now contentious – fund company Three Arrows Capital, digital asset-based speculative fund. speculation was not met.

Unlike most companies in the industry, their problems are a potential boon to performance: The company can provide customers with an overview of how to protect their assets in the event of bankruptcy or large-scale restructuring, where they would likely be. of behavior. those seeking to recover money as unsecured creditors.

There is also a long list of closet cryptoskeletons — money laundering, unequal incentives, liquidity provision, and shady governance — that Thom and Newman try to capitalize on by preventing their clients from falling into such traps.

And that’s especially true for traditional financiers who know the ins and outs of due diligence on stock voters, but are lost when it comes to the crypto arena. From custody to leverage to counterparty risk is an entirely different set of questions.

The company is also in the process of finalizing a review of a top European sports league and engaging a third-party company to do “hardcore deep dives” on potential hires for crypto firms. The team can also help with tokenomics for companies issuing their own digital assets for the first time.

Due diligence reviews are now conducted largely on an ad hoc basis in the space, resulting in a “huge internal effort to manage multiple due diligence investigations,” the company wrote in marketing materials. In most cases, service providers do not see the reports that perfORM collects to avoid influencing the content.

But the company is working on what it calls an “industry first”: conducting an operational assessment of service providers that the companies in question can then send to customers for free. And updates are scheduled every six months to prevent outdated information.

A potential perfORM customer, who was given anonymity because he is not authorized to speak to the press, said many startups “get a lot of hype because they are unique”, adding that this operation does something completely different — at least when it comes to digital assets.

“In TradFi, due diligence is a cookie cutter; it’s taken for granted,” the source said. “Crypto doesn’t have that and it’s a big step towards transparency.”

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  • Michael Bodley

    Chief editor

    Michael Bodley is a New York-based editor for Blockworks, where he focuses on the intersection of Wall Street and digital assets. He previously worked for the institutional investor newsletter Hedge Fund Alert. His work has appeared in The Boston Globe, NBC News, The San Francisco Chronicle, and The Washington Post. Contact Michael by email at: [email protected]

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