Crypto VC Firm Polychain Accuses Former Employee of Policy Breach

Crypto venture capital giant Polychain has accused Niraj Pant, a former employee, of making a backroom deal with portfolio company Eclipse Labs that broke the fund’s policies. Neel Somani, the former CEO of Eclipse Labs, allocated Pant 5% of a forthcoming Eclipse crypto token in September 2022, just days after Pant directed Polychain to lead the company’s $6 million pre-seed funding round. The allocation was later reduced to 1.33%, valued at $13.3 million at the token’s most recent valuation.

Background of Polychain and Niraj Pant

Polychain, founded by Olaf Carlson-Wee, is a major player in the crypto venture capital industry with over $11 billion in assets under management. Pant, a former general partner at Polychain, is now the co-founder of blockchain AI startup Ritual, also a portfolio investment of Polychain’s. Eclipse Labs, a blockchain company combining Solana and Ethereum technologies, received funding from Polychain in 2022.

Controversial Token Allocation

Pant’s undisclosed 5% advisory stake in Eclipse’s token raised concerns about conflicts of interest. The deal was not transparent to Eclipse’s executives, advisors, or large investors. Polychain stated that Pant should have disclosed the arrangement under the firm’s policies to prevent conflicts of interest.

Opaque Fundraising Norms in Crypto

The crypto industry’s fundraising norms often involve token allocations in addition to or instead of equity. Eclipse Labs has promised nearly 50% of its future token supply to employees, investors, and advisers. Pant defends his advisory agreement as legitimate, although questions remain about the timing and disclosure of the deal.

Policy Breach and Potential Impact

If Pant’s advisership at Eclipse began while he was still at Polychain, he may have violated the firm’s ethics policies. His involvement with Ritual, another Polychain portfolio company, adds complexity to the situation. Despite the alleged breach, Polychain’s investment in Eclipse has seen significant growth in value.