Arthur Hayes and Akshat Vaidya will take their time to beat bitcoin and ether’s returns. Hayes, former BitMex CEO, and Vaidya, former head of corporate development, created Maelstrom Capital, where Vaidya is head of investments. “As that’s what makes sense in this part of the cycle,” Hayes and Vaidya told CoinDesk. “Nothing scales like consumers,” Vaidya added.
Hayes’ crypto family office is Maelstrom. Since Hayes’ money has no liquidity sources, the business may remain “patient” and deploy capital to earn management fees. “We want to identify quality projects,” Hayes added. “It’s not spray-and-pray because we don’t have outside LPs.” Infrastructure projects have “strong technological moats that are addressing a large market,” says Vaidya.
Compound, Aave, and Uniswap were formed in 2017, but they weren’t noticed until 2019 and popularized until the DeFi summer of 2020. “Due to the negativity around [initial coin offerings] and the massive bear market, no one cared about them,” Hayes added. “Many projects claimed to be the next Uniswap, Compound, or Aave, but many were based on something less substantial. “Investors were willing to put money into these projects, knowing they could exit in a few months after getting their tokens,” Hayes said.
Hayes expects the market to doubt his current investments’ claims, goods, clientele, and technology around 2024.
That leads to clone ventures and “me too” investors, notably during the 2020-2021 COVID-19 bull market, when Uniswap, Compound, and Aave were flush with funds. “In this part of the cycle, it’s important to make money but also to have done the work during the bear market to identify which companies are genuinely valuable and which are just imitations,” Hayes said.
Some fared okay, and some were “[excrement] coins,” which Hayes will invest in when the market turns bull since that’s how crypto-tier gains are created. “We’ll invest in a complete piece of [dog excrement] because we get our tokens today,” he remarked. The storyline allows us to dismiss them in three months. Hayes may have been the U.S. government’s first crypto victim.
In 2020, the U.S. Department of Justice charged Hayes with violating the Bank Secrecy Act (BSA) for failing to establish KYC and AML procedures on BitMEX. Hayes and BitMEX co-founder Ben Delo pled guilty in February 2022.
Hayes, et al.’s guilty plea meant the government’s facts and arguments were never challenged in court. BitMEX did not utilize U.S. currencies. As legal experts noted at the time, the only previous occasion the BSA was employed against a non-bank financial organization ended with a deferred prosecution agreement—no prosecution in return for reconciliation. Hayes and Vaidya worry about U.S. authorities’ reach.
“The advantage of investing in infrastructure projects, especially at this cycle, is that a lot of those aren’t really in the crosshairs of regulators to the extent that others might be,” Vaidya said.
According to Vaidya, their portfolio firm EtherFi, a decentralized and non-custodial liquid staking platform, concluded a $5 million round in February.
“Nobody to go after because it’s noncustodial,” he said. “This company will never get a Wells Notice.”
Maelstrom’s portfolio firms, except one without a token basis, have been outside the U.S.
Vaidya said projects with U.S. founders are based in friendly countries like Switzerland.
