Investing in Credix's Liquidity Pool: Request for Community Comments

Investing in Credix’s Liquidity Pool: Request for Community Comments

Initial Disclosures:

  • The material herein is proprietary, for informational purposes only, and subject to change. Please review all information carefully.

The information provided herein is for the sole purpose of establishing a potential business relationship between the parties and specifically for providing a proposal to Mango DAO, and is subject to adjustment, change, and discussion. This overview may include or be based in part on projections, valuations, estimates and other financial data supplied by third parties, which has not been verified by Credix. This information should not be relied upon for the purpose of investing. Any information regarding projected or estimated returns are estimates only and should not be considered indicative of the actual results that may be realized or predictive of the performance of any investment. Past performance is not indicative of future results. The structure of the deal is in its developmental stage and - as such - is merely contemplated and subject to adjustment. All financial modeling is subject to assumption and error, and Credix reserves the right to modify, alter, and correct. Use or application of any model implies acceptance of the risk(s) of error, and waives liability for the model’s creator. The creator of the model is not responsible for the correctness or accuracy of the model. Rates are subject to change. Further, conflicts of interest may exist by and among the Parties, including that members of each entity may hold or acquire beneficial interests in each of the other Parties, their affiliates, and/or related entities. All investments carry risk, including the risk of loss of entire investment. Under no circumstances does Credix provide investment advice, tax advice, legal advice, or financial advice. This is not an offer to sell or a solicitation of an offer to buy securities.

Content Outline

  1. TL;DR
  2. About Credix
  3. The Opportunity
  4. Built for Treasury Investing
  5. Next Steps

TL;DR

Credix Finance (“Credix” or “we”), a high-growth decentralized institutional lending marketplace unlocking capital in emerging markets, would be excited to partner with Mango DAO (“Mango” or the “DAO”) as we fuel each other’s future successes. We are submitting this Request for Comment (“RFC”) to gauge the community’s interest in investing a portion of the DAO Treasury’s USDC into the Credix Senior Liquidity Pool. We welcome all comments, questions, and general feedback as we explore this potential partnership.

Credix channels: Website; Documentation; Application; Medium; Twitter; LinkedIn

About Credix

Credix Finance is the most sophisticated, global debt capital market platform in the world. We are powered by Solana and already used by over 25 institutional (debt) funds including multi-billion credit hedge funds such as MGG Investment Group and crypto native funds such as Alameda Research.

Driven by a local credit structuring team, Credix tokenizes bonds from well-established credit FinTechs in Latin America as structured products, with different layers of risk and return. Being off-balance sheet, the securitized deals consist of a first-loss junior tranche (taken up by the FinTech to align incentives), a mezzanine tranche (underwritten by specialized credit funds which do extensive due diligence) and lastly a senior tranche. The Credix Liquidity Pool combines all senior tranches on the marketplace, allowing passive investors to diversify across all underlying products, FinTechs and soon countries while still accessing an attractive, targeted risk-adjusted return of 12% APY on USDC.

The diagram below provides an overview of the Credix marketplace.


Credix allows for the creation of marketplaces which contain multiple individual deals. A deal is a debt facility for a credit fintech represented by a bond backed by real-world loans (auto, SME, etc.). Currently, only the FinTech marketplace has been deployed, but others are epected to go live in Q4 2022. Comprising each marketplace are select deals, each of which is split up into tranches, creating investment opportunities for investors with different risk/return profiles. Most often a senior/mezzanine/junior tranche setup is used. In this setup, the senior tranche has the lowest risk, with the lowest return because it is protected by more junior tranches in case of defaults. A capital cushion is built into the SPV and is depleted first if a default happens. In the event the cushion does not cover the defaults, the junior tranche of the FinTech is effected. If additional defaults occur, the mezzanine credit funds are impacted before senior investors would feel any losses. However, to protect against any defaults, we negotiate protective covenants that cut off any additional capital supply to the FinTech if loan losses reach a certain threshold. To-date, we have not needed to act upon these covenants.

Since launch, the Credix marketplace has funded approximately $23 million of loans to emerging markets FinTechs with several other deployments in process. To date, Credix as a company has raised $13.75 million of funding across Seed ($2.5M) and Series A ($11.25M) rounds, both of which were anchored by blue-chip investment firms. Credix’s equity investors include Motive Partners, ParaFi Capital, Circle Ventures, Victory Park Capital, MGG Investment Group, Valor Capital, Fuse Capital, DRW Cumberland and Solana Ventures. In addition, over 25 funds have joined our Liquidity Pool including leading firms such as Alameda Research, Rockaway Blockchain Fund, Almavest, Addem Capital, MGG Investment Group, and Transfero Swiss have joined as liquidity providers or underwriters. These dedicated investors are critical to our growth as they provide not only essential capital, but also a wealth of knowledge and guidance.

Additionally, we have partnered with some of the Solana ecosystem’s top protocols. On September 8, 2022, UXD Protocol announced a commitment to invest from its insurance fund into the Credix Liquidity Pool. Earlier this year, Mean Finance announced an integration with their Multisig Marketplace to provide our investors the best, safest and smoothest way of managing their assets and treasury. In addition, Mean Finance joined our Liquidity Pool with a material investment. UXD and Mean Finance are some of the examples of protocols that have joined the Credix ecosystem over the last couple of months after in-depth due diligence and research on security, economics and legal nuances. They are paving the way for a number of select others whom we invited to the Credix ecosystem recently and are in the process of onboarding. We seek these relationships because we believe in building a cohesive, self-sustaining, on-chain ecosystem through protocol-to-protocol partnerships that are synergistic in nature and promote the growth of our community.

We have shared some of our transformational updates on our Medium including:

Credix’s founders have deep experience building innovative tech-enabled services together with specific knowledge of our core Latin American economies. Making up our founding and core leadership team are:

  • Thomas Bohner - Founder, CEO
    • LinkedIn; Twitter
    • Responsible at Credix for defining strategic priorities, coordinating execution with management, and relationships with key shareholders, investors, and business partners.
    • Spent his career designing and delivering complex financial services solutions across capital markets and banking.
    • Launched from the ground up a blockchain sales & engineering team across 3 continents, growing to 100 FTEs. Closing major deals with clients such as London Stock Exchange Group, BNP Paribas, and Euroclear.
    • Past Experience:
      • Vice-President, Head of Blockchain and Crypto - IntellectEU
      • Associate - P20 Consulting / Hogan Lovells
      • Analyst - Motive Partners
    • Education:
      • Master in Finance - University of Antwerp
  • Maxim Piessen - Co-Founder, CTO
    • LinkedIn; Twitter
    • Responsible at Credix for our global technology and product strategy & execution, translating stakeholder needs and requirements into a scalable product architecture and coordination with the engineering team.
    • Physicist with strong expertise in artificial intelligence & blockchain working on innovative products at IntellectEU for the private banking and investment management industry.
    • Past Experience:
      • Head of Product Management - IntellectEU
      • Head of AI, Data, and Quantum Computing - IntellectEU
    • Education:
      • Master in AI - University of Leuven
      • Coding Bootcamp - Le Wagon
      • Master in Physics - University of Antwerp
  • Chaim Finizola - Co-Founder, CGO
    • LinkedIn; Twitter
    • Responsible at Credix for commercial and business partnerships, scaling growth through marketing, communications, and business development.
    • Led emerging market business development and marketing efforts at IntellectEU. Launched ClaimShare, a fraud detection product for the insurance and financial industry using DLT.
    • Past Experience:
      • Head of Business Development, Emerging Markets - IntellectEU
      • Product Manager - IntellectEU
      • Marketing & Growth - Settlemint
    • Education:
      • Master in Finance - University of Antwerp

The Opportunity

Credix’s Liquidity Pool supplies capital to the Senior tranches of all deals across a marketplace. Thus, the Liquidity Providers’ (“LP”) capital is not only protected by its payment seniority, but also by the diversification of investing in multiple deals. Our Liquidity Pool earns a targeted 12% APY on USDC. Further, it is a passive investment position, given that the due diligence and deal structuring is performed by the Underwriter, which is always in a more junior position and typically is a blue-chip global investment manager with deep direct lending experience. Thus the LPs can rely on the expertise of an experienced investor with more “skin in the game” to structure optimized deals. Further aligning incentives, the FinTech issuer provides the first-loss capital in deals.

Today, the Mango DAO Treasury Vault holds ~$53.8 million uninvested, idle USDC. We see a mutually beneficial opportunity for Mango to participate in our Liquidity Pool as an LP with a portion of this USDC balance. Our goal is to assess the community’s sentiment on moving forward with a potential Mango-Credix partnership. With positive sentiment, we will issue a more formal proposal.

Built for Treasury Investing

Treasuries and insurance funds should be closely managed and not recklessly invested. We understand and support this thesis. We designed our platform with several core tenets that we believe should provide comfort to DAO treasury investors.

Below, we identify four core pillars that make for a successful treasury investment and explain how we strive to support them.

  • Capital Protection
    • A treasury or insurance fund is designed to be a “just in case” reserve. It must be protected. In our deals, LPs invest in the Senior position across all deals in a marketplace. This delivers protection in the waterfall prioritization and also diversification from multi-deal exposure. The Underwriters, which invest in the Mezzanine position and lead comprehensive due diligence, are typically top-notch global firms with extensive investing experience. The Credix internal team, which includes in-market operators, conducts additional due diligence, while Vert Capital monitors loan and collateral quality. To-date, no investor has lost any amount of capital on our platform; Credix has a flawless record of protecting your capital.
  • Liquidity
    • It’s your capital; you’ll want to know you can get it back. We strive to always make that possible through a variety of mechanisms. First, our Total Value Locked (“TVL”) has expanded more than 30% over the trailing 30-day period. Organic platform liquidity is quickly growing. Second, we target a utilization ratio (TVL/Deployed Capital) of ~85% and seek to actively manage that balance. Additionally, we have key institutional partners that stand ready that can provide liquidity by buying out LP interests. Finally, as principal and interest payments accrue to the platform, Senior LPs are repaid first thus providing recurring earned liquidity. Overarching all of these themes is our OTC marketplace which is in the final development stages and, with a targeted December 2022 launch, will allow investors to transfer or sell LP or Tranche tokens.
  • Returns
    • An investment should provide a return. Our LP investments provide above-average, stable, understandable returns. Limited access to capital in our core LatAm markets creates naturally higher interest rates due to supply / demand dynamics. For example, traditional rates on auto and student loans are over 35% and 45% per year. Our efficient marketplace allows in-market FinTechs to drive business by undercutting these rates while also maintaining a positive spread. Our investors reap the benefits. There is no leveraging of investor capital, inflationary tokenomics, or general “smoke-and-mirrors” activity. Additionally, we have experienced zero missed payments or defaults to the platform since inception and use active, frequent monitoring of our FinTech partners’ financial condition. Our platform delivers understandable, natural yield bolstered by strong asset quality metrics; we are built for the long-run. Uninvested capital is losing purchasing power at unprecedented rates as inflation spikes worldwide. Our high-yielding LP product mitigates this inflationary decline and exceeds the hurdle rate to deliver a net positive return.
  • Protocol Risks
    • Security is the backbone of everything we do; it will always come first. We reduce smart contract risk through rigorous testing and frequently undergo third-party audits. In our full test suite, we constantly run unit tests, visual- and automated in-app user-flow tests, and leverage our full-fledged digital twin to run infinite numbers of end-to-end scenarios through the smart contracts. Our marketplace is fully-permissioned, meaning all stakeholders must undergo full KYC / KYB in order to get whitelisted. This helps reduce the risks of bad actors gaining access to our platform. Finally, we strive to always maintain full legal & regulatory compliance with two in-house legal counsels, local and global lawfirms while taking a metered expansion approach. We are fortunate to be in frequent communication with and have the support of Banco Central do Brasil (Brazilian central bank), which serves as a testament to our efforts. Showing additional approval of our regulatory, legal, and compliance framework, multiple blue-chip investment firms have partnered with us.
    • The Credix development team has built a best-in-class protocol with a layered security model. Our most recent third-party audits below validate this security and functionality:
    • On-chain or off-chain, legal matters. We work with top-tier law firms, including ones in our target markets, to structure legally-compliant transactions that provide the utmost protection for all parties. Some of the law firms we work with include Clifford Chance (London & USA), Pinheiro Neto (LatAm, Brazil) and VBSO (Brazil).

We believe that we deliver capital protection, liquidity and above-average returns, all on a security-first, legal- and regulatory-compliant platform with substantial growth.

Next Steps

We stand ready to answer questions from the Mango community as this RFC is reviewed. We also would propose to host an Ask-Me-Anything call on one of the DAO’s servers to help the community gain comfort with our team.

We believe a Mango-Credix partnership is mutually beneficial for all involved parties and hope the DAO shares the same feeling. We see this as the beginning of a long and prosperous partnership. With a positive community response, we will proactively move forward with structuring an investment by the DAO’s treasury into our Liquidity Pool. We are ready to move as quickly as the DAO is.

We are growing quickly and selectively inviting key partners to join our journey. Our exclusive network of partners includes some of the most prominent names in both traditional and decentralized finance.

Mango Community: Join us. We hope to join you. Let’s grow together.

6 Likes

Mango Community:

Thank you all for reading our proposal this week. I’m following up here to share a just-published blog post reviewing our recent partnership with UXD. UXD Protocol used its insurance fund to invest $1M into our Liquidity Pool which will be distributed across the Senior Tranche of all deals in the Credix marketplace with a ~12% targeted APY. We think very highly of UXD and its community so this is an extremely exciting opportunity to build with another innovative project.

We envision a similar collaboration with Mango and truly believe it would be hugely beneficial to each of our projects and the space as a whole. Please reach out to me directly and / or post here with any comments or questions.

Thank you! Let’s Build!

What’s the average rate being charged to borrowers with Credix?

1 Like

Hi @_69:

Thank you for the thorough review. Rates from our FinTech partners to the end borrowers typically range from 2.5% - 3.5% per month. At the midpoint, this would equate to a 36% APR. Please keep in mind that this is an approximation as we do not disclose customer information outside of nondisclosure agreements. This can, however, serve as an example of how our lenders are able to undercut traditional rates by leveraging our technology’s efficiency.

It is also worth noting that in our structured deals, investors in the more junior tranches can anticipate higher returns with lower protection while the inverse is true for more senior capital providers. In this instance, Mango would participate in our Liquidity Pool which fills the Senior Tranche with the greatest capital protection and a ~12% targeted APY while more junior investors could expect a higher APY with higher risk.

Thank you again and please ask any & all additional follow-up questions.

– August