TLDR
- Polychain Capital accuses former general partner Niraj Pant of making an undisclosed token deal with Eclipse Labs, a Polychain portfolio company.
- The deal allegedly involved Pant receiving a 1.33% stake in Eclipse’s future tokens, worth $13.3 million.
- Pant claims the deal was finalized after Polychain’s investment and didn’t violate policies.
- The situation highlights concerns about transparency in crypto venture capital deals.
- Polychain later invested in Ritual, an AI startup co-founded by Pant.
Polychain Capital, a leading cryptocurrency venture capital firm, has accused its former general partner Niraj Pant of making an undisclosed token deal with Eclipse Labs, a startup in which Polychain had invested.
This situation sheds light on the complex relationships and potential conflicts of interest in the world of crypto venture funding.
According to Polychain, Pant arranged to receive a stake in Eclipse’s future cryptocurrency tokens shortly after leading Polychain’s $6 million investment in the company’s pre-seed round in August 2022.
Initially, this stake was reportedly set at 5% of Eclipse’s tokens, but was later reduced to 1.33%. At Eclipse’s most recent private valuation, this stake would be worth approximately $13.3 million.
Polychain states that Pant did not disclose this arrangement to the firm, which they say violates their policies designed to prevent conflicts of interest. These policies require employees to report personal investments that might appear improper.
Pant, who left Polychain in 2023, disputes this characterization of events. He claims that the deal with Eclipse wasn’t finalized until September 2022, after Polychain had already invested.
Pant shared legal documents showing an advisory agreement dated April 2024, which he says amends an earlier agreement from September 2022.
The alleged deal was made with Neel Somani, the former CEO of Eclipse Labs. Eclipse is developing a blockchain that combines elements of the Ethereum and Solana networks.
Sources close to Eclipse claim that Somani offered Pant the token stake as an incentive to secure Polychain’s investment and endorsement.
This situation highlights a common practice in crypto venture capital, where investors often receive cryptocurrency tokens instead of traditional equity stakes. These arrangements are rarely disclosed publicly, partly due to regulatory concerns.
Polychain says it only learned about Pant’s deal with Eclipse after he left the firm in 2023. The company has not commented on whether this revelation has affected its relationship with Ritual, an artificial intelligence startup co-founded by Pant, in which Polychain later invested.
Despite the controversy, Polychain’s investment in Eclipse appears to have been financially successful so far. A source close to the fund reports that the value of Polychain’s stake in Eclipse has increased tenfold since the initial investment in 2022.
This incident raises questions about transparency and potential conflicts of interest in crypto venture capital. It’s not uncommon for individuals in the industry to wear multiple hats – as investors, advisors, and founders – which can create complex situations.
