The content of this communication is for informational purposes only. You should not construe any information contained herein as legal, tax, investment, financial, or other advice. You should not rely on the information contained herein as a basis for making any business, legal or other decisions. RWA Company LLC and its members, officers, directors, owners, employees, agents, representatives, suppliers and service providers cannot be held liable for any of the information contained in this communication.
Nothing contained herein constitutes a solicitation, recommendation, endorsement, or offer by RWA Company LLC or any third party service provider to buy or sell any securities or other financial instruments in any jurisdiction.
THIS INFORMATION IS PRESENTED “AS IS” FROM 6S CAPITAL; RWA COMPANY LLC TAKES NO RESPONSIBILITY FOR ITS ACCURACY.
This originator is being represented by RWA Company LLC via the designated appointee Gregory Di Prisco (@g_dip), all questions and concerns from the community may be addressed to Greg.
Background check (on management):
Credit check (on primary entity):
The scope of our background checks (currently run through Kroll) can be found here. Entity credit checks are performed by Experian. No personal credit checks were performed as all loans are intended to be non-recourse.
Risk: Assuming that the debt ceiling is set to 0 and the trust account is filled with the entirety of funds recovered from outstanding loans, there exists the possibility (although exceptionally unlikely) that communication could break down between all parties involved and the Trustee would lack the direction it requires to take any action at all. Crestbridge, as a regulated Service provider in the Cayman Islands and as directors of the Trust Sponsor, has a fiduciary obligation to conduct themselves in the best interests of the Trust Sponsor and its interests, including the Delaware Trust, thus they have the obligation to cause the transfer of DAI back to MarkerDAO. The trust sponsor has authorized one individual as the authorized signatory with specific authority. Should this individual fail to carry out his duty of instructing the trustee to return the DAI, the directors can remove this individual and appoint another authorized party. Further, the directors can also take action directly. As an additional safeguard for this, 6s Capital was inserted as another party that can cause the transfer in this extreme edge case that Crestbridge fails to act. However, the extreme edge case of the edge case is that the authorized representative, Crestbridge, and 6s Capital, are all unresponsive. This would result in the cash remaining “stuck” in the trust account. If the Trustee receives no direction, it has the right to interplead this money into a Delaware Court and permit the Court to decide who is entitled to it. MakerDAO (or an agent on its behalf) would have to file a claim with the Court to recover the money. This doesn’t mean the money is lost, as it should be fully recoverable with due process (as the beneficiary of the Trust is MakerDAO). To avoid that situation, the below are solutions for both the short-term (already in place) and medium term (will be the first amendment to the Trust Agreement).
Mitigation (short term): Gregory Di Prisco at RWA Co. has been given a limited power of attorney of Matthew Rabinowitz of 6s Capital (provided below) exclusively for the sole purpose to direct the Trustee to send the DAI back to MakerDAO in the event that every other path breaks down. In addition, 6s Capital will be contractually bound (pending the execution of an additional agreement which I will confirm here when signed) to pay RWA Company a fee of $100,000 if it revokes this power of attorney while any amounts are due to MakerDAO. We believe that this solution is adequate in the short term as 6s Capital has no incentive to leave the money sitting in the trust account (they cannot use it) and would incur an economic cost, in addition to the threat of litigation, if they do not take action. This would-be “stick” should be more than sufficient to cause 6s Capital to notify the Trustee to send funds back should the trust sponsor fail to do so.
Mitigation (medium term): Unrelated (potentially regulated) counterparties that the community believes will ultimately represent Maker’s best interest could be added to the Trust Agreement (assuming successful KYC/AML with WSFS Bank and other transaction participants) and explicitly given the power to direct the funds back to MakerDAO in the event communication between the Trust Sponsor and 6s Capital break down. Any amendment to this ability would require the affirmative vote of MKR holders to amend the Trust Agreement. Some names being contemplated at this time include the DAI Foundation, among others.The community should deliberate on who would be the ideal party that will stand the test of time. This could go in the “first amendment” to the structure in ~6 months which would require the community to vote on and pass that amendment.
Risk: Money in the escrow account may at times exceed FDIC insurance limits. Should WSFS Bank fail, could Maker experience uninsured losses?
Mitigation: WSFS is a Trust company which means the assets are held in trust and are not assets of WSFS under the U.S. bankruptcy code. That means that creditors of WSFS cannot reach the trust assets. FDIC insures deposits that are liabilities of a bank. WSFS is not serving as a bank in this structure so FDIC limits are irrelevant. As Trustee, pursuant to Delaware Trust Law, WSFS is permitted to invest cash of the Trust in overnight US government securities. The Trust Sponsor does not direct the Trustee in overnight investing. This would be part of WSFS standard trust treasury management.
Risk: If slippage is incurred at the broker-dealer, the amount of Dai could be different from what’s in the Vault. There will also be another accounting discrepancy which arises from “phantom stability fees” as the Vault cannot tell when money has been paid back to the Trust.
Mitigation: The broker-dealer will utilize a TWAP when trading Dai to USD and vice versa. This could cause minor delays in repayment to the Vault but should reduce slippage. For the accounting discrepancies caused by the Vault constantly incurring stability fees while the Trust does charge interest on idle cash, MKR holders will need to be aware of the difference and make adjustments to the system accounting periodically.
Executed Power of Attorney Document