DWF Labs Linked to Dubious Deals Worth at Least $65 Million

DWF Labs, a market maker, has been suspected of dumping tokens from its portfolio projects totaling at least $65 million. The alert came from a Twitter user going by Nay.

1/ Who the heck is DWF Labs?

In the last couple of months, they have been everywhere, throwing ridiculous checks at everyone from legit projects to dead ones.

I dug a bit into on-chain data and other resources, and it doesn’t look good.

— Nay (@nay_gmy) April 10, 2023

Nay examined the company’s transactions and found that they could not be classified as \”standard market-maker deals.\”

2/ On this screenshot are some of the transactions that I found onchain. And there is much more.

Almost in every case the number of tokens in/stables out matches by time & dollar amount, meaning these are not loans, hence not standard MM deals.

$65m confirmed. pic.twitter.com/E6tcrrixsH

— Nay (@nay_gmy) April 10, 2023

“In almost every case, the number of tokens in/out matches by time and dollar amount, which means these are not loans,” Nay wrote.

All the deals he studied consisted of two stages:

• DWF Labs either conduct numerous transactions of 50,000-100,000 stablecoins per day, or carry out larger deals up to $5 million;
• sends all the coins to centralized exchanges.

3/ The pattern for all their deals is: they either buy in many transactions of 50-100k stables once a day or so or in larger transactions of up to $5m per tx.

The second leg is always the same though – they deposit it all (or almost all) on CEXes. pic.twitter.com/tyJk6GHmov

— Nay (@nay_gmy) April 10, 2023

DWF Labs operates in the Korean market. Since November 2022, 11 projects in which the market maker invested have voluntarily disclosed information via Xangle, but for most of them the dollar amounts are not disclosed.

4/ DWF is active in the Korean market. Some Korean projects voluntarily disclose new investments on Xangle.

11 projects disclosed since November, most without the $ amount. DWF invested $5m into a $6m mcap APM. BIOT disclosure doesn’t match onchain data.https://t.co/nKKKgWKqhC pic.twitter.com/TrDK21668G

— Nay (@nay_gmy) April 10, 2023

Nay also found a number of inconsistencies in this information:

“DWF Labs invested $5 million in APM with a $6 million capitalization. BIOT disclosure does not match on-chain data. There are also several deals they reported that I couldn’t reconcile. The strangest thing is that in many cases on-chain activity doesn’t come close to the reported volumes.”

5/ There are also some deals that they reported but I couldn’t match them onchain. Many of them are high-profile deals.

The weird thing about those is that in many cases no on-chain activity would correspond to anything close to reported sizes, which is not the case for others. pic.twitter.com/mNUVwuhcYl

— Nay (@nay_gmy) April 10, 2023

In total, DWF Labs’ partners have disclosed deals totaling nearly $150 million. The user was able to confirm on-chain deals totaling $65 million, but suggested there may be more:

“If you start digging, you will see a bunch of other tokens with the same patterns passing through their wallets. We’re talking hundreds of millions of dollars, mostly in the last six months.”

Nay was surprised that a company hardly known until recently had invested around $200 million in liquid tokens and placed most of them on exchanges.

“I think one explanation is that they sell tokens on behalf of teams and send the money upfront, pocketing the delta. Many deals have a 10–20% discount, others don’t. But why is this being pitched as “strategic partnership” and investments?”

After DWF Labs’ operations, tokens SSV, SNX, TIME, FLOKI fell 10% to 40%. Some dropped more than 90%.

9/ Regarding post-investment price action, tokens have generally underperformed.

The last 4 tokens on the list – SSV, SNX, TIME, FLOKI, have lost between 10% and 40% since the 1st DWF's tx on exchanges (sorry for the charts, can\’t do any better atm). Some are down 90%+ pic.twitter.com/juashQ4WFB

— Nay (@nay_gmy) April 10, 2023

Nay also found a wallet, in which the market maker allegedly holds tokens. At the time of writing it held $9 million.

The managing partner of DWF Labs is Andrey Grachev. Since 2018, the community has accused him of various crypto frauds, including raising funds for a project that never launched, inefficient portfolio management, and a link to OneCoin — a $4 billion crypto pyramid.

Shortly after the thread was published, Grachev commented on his LinkedIn page. He said that DWF Labs “does not just invest money, but is a partner and a friend” to its portfolio projects. The cheque size and the terms of possible cooperation are adjusted, he said, on the basis of the project’s assessment.

“We invest at pre-seed and seed stages, usually via SAFT. We also invest in line with vesting schedules and lock-up periods or tranches if the coin is already registered and trading,” wrote Grachev.

He noted that almost all DWF Labs’ assets are kept on CEXs \“for security and capital-efficiency reasons, including as collateral for trading.\”

“We never invest in NFTs, we adjust our investments based on counterparty risk, and we never keep too much money on hot wallets — there are too many cases of hacks affecting market makers and funds, and we do not want to be among the victims,”

In early April, DWF Labs invested $10 million in the payments platform Alchemy Pay. Following the strategic investment, it was valued at $400 million.