Chia Network has given the notice to 26 of its 70 employees today, which accounted as a third of its workforce. The decision came as a result of the loss of its banking partnership with Credit Suisse.
This has come to cause a costly delay of the firm’s effort to list as a public company in the US. The open-source software business is known for going after a compliant route to establishing its listing on a US exchange.
Five months back, Chia Network started the process to go public by filing with the Securities and Exchange Commission (SEC). However, this move has been met with a major hiccup following the collapse of its bank.
Following several years of scandals, Switzerland’s Credit Suisse collapsed in March 2023. Ranging from money laundering to tax evasion, the scandals made the bank look increasingly risky as it was soon followed by big deposit withdrawals and a decline in share price.
While Chia Network is now in the process of re-establishing a lost banking relationship, uncertainty remains on how long the SEC might take to review the request of a new bank.
The name of the bank has not been revealed yet as the network is still in the preliminary stage of SEC negotiations. According to Chia CEO Gene Hoffman, the layoffs are focused more on “ecosystem support” than sales and marketing.
He said: “Unfortunately, we’re going to lose some great people as we’ve endured a challenging funding environment over the past several months….It was a difficult decision to give the company the runway it needs.”
Hoffman also mentioned that the company is looking to sell from its stockpile of its own token, $XCH. The chunk of 21 million $XCH constitutes almost three quarters of the supply of those coins, with nearly nine million in current circulation.
However, Hoffman said Chia would only unload a limited amount as a backup source of funding on the runway to its initial public offering (IPO). “Certainly, we’re not going to be selling even a material amount”, said Hoffman in a comment.
At present, the network has an unencumbered 2.6 million $XCH, worth around $70million at current prices, which can be easily unloaded. However, as a repercussion of this news, the price of the token fell about 2.3% to $27.18 from the day’s trading high.
In the past, Chia has refrained from selling any of its tokens fearing how it would be classified by the SEC. But recent judgements in court cases involving Ripple and Terraform Labs have shown that a carefully decentralised token can satisfy current standards for defining a digital commodity, noted Hoffman.
While the rest of the industry fights over the legal tribulations cast upon them by the US regulator, Chia seeks to walk along with the agency’s expectations in compliance.
The SEC had previously approved Coinbase Inc.’s effort to go public. However, this was soon met with an enforcement action accusing Coinbase of violating securities law as an unregistered exchange.
Noting that it’s difficult to predict how long the process will take, the Chia CEO added: “Our interaction with the SEC has been quite normal, which is saying something in this space. We’ve expected it’s going to take a little longer than average to get through the SEC for somebody like us.”