6s Capital - State of the Business

If you are referring to the Delaware Trust folks–from my understanding it was hard enough to get them to agree to participate in Blockchain related business affairs–imagine asking them to learn how to use Metamask? All in all–RWA realm is currently so small–that when I showed a TradeFi buddy of mine how much DAI is outstanding (9B) he laughed. Imagine enticing traditional folks to participate in RWAs when the TVL is less than what, $50M?

And then they see things like this :rofl:

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Who owns those $1.4M is not an easy answer.

  • At the first level, you can say that the Trustees are holding the $1.4M. They will certainly not be kept liable for not paying accrued interest tho (but you can be sure that they will hold some to pay themselves if needed). This is an accurate answer, but it is quite useless.
  • The account is held by the Trust for the benefit of the CaymanCo that is for the benefit of the Red Cross Cayman (with a bit of simplification). Again not useful, they have no power in the structure and will not see a dime.
  • The Trust Agreement is clear that the DAI facility is for the benefit of 6S. You can argue that as soon as there is a draw it is 6S problem to reimburse. Not saying it is correct, but you can understand that.
  • If you exclude intermediaries, there are only two parties: the lender (MakerDAO) and the borrower (6S). The question, therefore, is where you put the Trust and the CaymanCo. The Trust is directed (in the sense of a directed trust) by CaymanCo (but limited by the Trust Agreement). The CaymanCo is directed by Crestbridge acting for a client (I will assume 6S or an affiliate, that might be wrong, but in any case, it’s the borrower that chose the client). Nothing forces Crestbridge to listen to the client but there are also not many limitations.

It is my view that this is a borrower-controlled structure. Again, controlled doesn’t mean that the borrower can do whatever it wants. The borrower side presents it as purely administrative powers.

With MIP58 (based on Ogier’s recommendation, and the same ideas are present in Monetalis), the legal conduit is directed by MakerDAO. MakerDAO can instruct the intermediary to do things (noticeably to report). From the legal memo kindly shared by Monetalis:

The interests of the MakerDAO community will be protected by a combination of the usual protections on which the institutional holders of asset-backed securities rely and a robust trust arrangement which will effectively be controlled by the community via the governance arrangements set out in the trust instrument.

(trust is what I describe here as CaymanCo for simplicity as the trust should hold a company for its operation, which is why, in some jurisdiction, a Foundation is easier as it is combining both in one)

Implementation of a MakerDAO controlled structure is nevertheless more complicated as trustees are less comfortable working for a DAO and being public about it. The messaging mechanism is not that easy neither. All this is solvable nevertheless.

In both cases, you should make sure that all the intermediaries are paid.

MIP21 itself being an unsecured loan (as the token used as collateral is a dummy one, and as we can see even taking in account the cash at the Trust, it is already undercollateralized), it is my view that ultimate control of the intermediary by MakerDAO (not the borrower, not a core unit, not a Maker Representative but the MKR holders) is of paramount importance.

Otherwise, you end up having lent 1.4M DAI but the borrower telling you he didn’t borrow anything.

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Well, screw him. $9B is more than the annual budgets of at least 12 U.S. state governments, more than the total assets of any bank in the U.S. below the top 140 or so, and more than the market cap of about 20 of the S&P 500 companies. More than the annual GDP of about 80 countries.



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Hi OmahaLawyer,

As I’ve mentioned, Matt has retained the services of RWA Co. to help engage with forum/governance activity while he focuses on growing the operating company. In that light I’d like to attempt to answer some of your questions, with the caveat that I may need to gain clarification from Matt on certain technical points. Also thank you for asking this publicly so that we can continue to work towards a proper “FAQ” on how the current structure operates (and potentially address and discuss its limitations).

How and who was the 1,400,000 DAI requested and obtained, if not through a borrow request under the credit agreement by 6S? If not a borrow request, why would 1,400,000 be obtained before there was a borrow request?

What happens is detailed in this post that I put up on our website, but I’ll provide a brief summary. Once DAI is drawn from the Vault it flows to the secure conduit contract (MIP21), of which the receiver address belongs to the broker-dealer. The broker-dealer has irrevocable instructions from the CayCo. (who is legally sending the funds to it) that whenever it receives Dai from this address it should only convert it to USD and send it to the CayCo’s escrow account. This escrow account is held with WSFS and also has irrevocable instructions that when it receives USD from the broker-dealer, it should only send these funds to the Trust Account. Once the USD is in the Trust Account it is now under the control of the Trust Agreement. I’ll note that up to this point, the Credit Agreement has not been used, this is only the process of getting the Dai into USD in the “real world.” Only three things can be done with the USD once it’s in the Trust Account: (1) It can be lent out pursuant to the Credit Agreement, in which it will then begin accruing interest, (2) it will remain in the Trust Account and likely be held in short-term government securities, or (3) it can be returned to the Escrow Account, which then has similar irrevocable instructions to only send the USD back to the broker-dealer, who then also has similar irrevocable instructions to convert this USD to Dai and send it back to the secure conduit (i.e. the Vault). Note: This is the circuit path test that Matt did to evidence this path before it was used on a larger scale.

The 3% stability fee started accruing the moment the 1,400,000 DAI was obtained from the contract?

The stability fee began accruing at the Vault level, but will not be reflected in the Trust until it has been lent out via the Credit Agreement. The same issue arises when accounting for the fees of the intermediaries. It is correct that this causes a discrepancy between what the system believes it has earned versus what it has actually earned. I personally like to frame this similarly to the way that ETH Vaults carry Oracle costs that are not accounted for at the stability fee level, but taken out of income later on. This issue was detailed in this post for reference.

Does any portion of the interest owed to the Trust, or the accruing stability fee, need to be paid before the loan maturity in 2024?

It is my understanding that the loans accrue interest on top of the debt, similar to the way an ETH Vault operates. I believe this interest compounds quarterly.

As to the smart contract, with the RWA001 token locked 15 million can be obtained by the Trust without the Trust proving anything further to Maker, right?

The entirety of the debt ceiling can be drawn to the Trust at any time, at present it could be held in cash at the Trust or deployed pursuant the Credit Agreement.

At this point, Maker’s asset is its beneficiary interest in the Cayman company, which is the owner and beneficiary of the Delaware Trust? So, prior to the Trust obtaining any collateral, Maker’s interest is in the $ in the Trust’s account? Is that amount publicly available anywhere and/or does the Cayman company report that regularly to Maker? Should that beneficiary interest be reported as part of Maker’s balance sheet, valued now as the cash in the Trust’s account and later as the value of collateral?

RWA Co. is responsible for reporting at this point in time. We intend to make monthly reports to the forums (and on our website and ultimately via API and published on-chain) once the Credit Agreement has been utilized. While we don’t have any legal obligation to MakerDAO (as no one really can), our reputation is our primary asset and is being pledged as “collateral” in representing the accuracy of this information. Direct reporting from the Trustees is a goal that we’re working towards but will take a considerable amount of time to get them comfortable with.

When 6s makes a borrow request, in what way will the collateral documentation provided to the Trustee such as mortgages be available to Maker, at least after the fact?

If I’m following, I believe you’re asking if documents like appraisals can be made public once they’ve been presented to the Trustee? I’m going to have to defer to Matt for a more detailed reply, but I’d imagine that this is not practical. The Trustee confirms the existence of these documents and will not allow debt to be drawn from the Trust without them - Maker, at the very least, needs to trust that they will perform that function correctly. As for the content of these documents, it would be great to know what information you find critical so that RWA Co. can present this information to the community in a privacy-preserving manner.

What is the Trustee charging for fees, and when did/does that start? Have fees already been paid to the Trustee, and I assume that was by the Trust? Will those fees be passed on to 6s as borrower? Does the Trustee have to give notice to the Cayman company or Maker before it pays itself from the Trust?

Trustee fees will be outlined in the reporting from RWA Co., specifically to address the discrepancies between Vault stability fees and actual accrued interest. I don’t know off the top of my head what the fee is but I can get back to you. I do know that thus far Matt has personally covered the fees for various service providers, including lawyers and Trustees. Legally speaking, the fees come out of the interest accrued in the Trust (I’d draw on the Oracle example again and would advise that it’s probably unreasonable to expect borrowers to cover these), but it will have to be a conversation between Matt and the MKR holders to determine who foots what bills at the end of the day.


17 December 2021

6s closed on a deal (Service King as tenant), repaid the loan, and sold the project to an investor, with an expected exit cap rate.


30 December 2021

6s closed on a deal (O’Reilly as tenant). This $~2.5MM closing of a stabilized project was 100% financed by 6s Capital. This exclusively utilized the equity within 6s Capital but will “fit in the box” as collateral for the existing Credit Agreement for future use.

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