US-based enterprise blockchain startup Symbiont filed for Chapter 11 bankruptcy earlier this month. The holding company is backed by companies such as Citi, Nasdaq Ventures and Broadridge, with Vanguard as one of its main clients. As of the middle of last year, it had raised $43 million in funding.

In December 2021, it went live with a solution that automatically calculates margins for forward foreign exchange (FX) contracts, one of the solutions it co-developed with Vanguard. He also created a blockchain platform for private market securities in partnership with Nasdaq and another for asset-backed securities.

One of Symbiont’s biggest projects is with Lewis Ranieri, who popularized mortgage-backed securities. He involved creating a shared data solution for use by the mortgage servicing industry, reaching the minimum viable product stage in the middle of last year. CEO Mark Smith claimed that it would be the largest blockchain application ever implemented with hundreds of thousands of lines of smart contract code.

Smith has a clear vision for Symbiont to address inefficiencies in capital markets using blockchain by creating native golden records of assets on the Assembly blockchain. However, he believes that the blockchain layer could become a commodity, so the company focused on developing vertically integrated solutions with its smart contract language.

The bankruptcy trigger

According to the bankruptcy filing, the trigger was the inability to repay a LM Funding loan secured by Symbiont’s assets and due on December 1 of this year. LM Funding is a listed specialty lender and also a Bitcoin miner. Symbiont entered into a loan agreement on December 1, 2021, drawing $2 million of a $3 million line of credit at a rate of 16%.

We suspect the purpose of the loan may have been to save an expected payment from a legal case. Last year, Symbiont won a lawsuit against IPREO, owned by IHS Markit, for damages of up to $78.9 million. Before IHS Markit acquired IPREO, Symbiont had a joint venture with IPREO to address the secondary market for syndicated loans.

The judge ruled in favor of Symbiont in August 2021. However, IHS Markit appealed, hence the likely reason for the loan. On December 28, 2021, the companies reached an agreement and Symbiont was paid $53 million, according to IHS Markit’s annual report.

The company will publish more details about the bankruptcy later this week.

In addition to the FTX debacle, two major DLT initiatives have been shut down in the last month. The Australian Stock Exchange (ASX) has taken its CHESS post-trade replacement system offline. And Maersk announced that it was winding down its Tradelens shipping initiative with IBM. This follows the June liquidation of bank-backed trade finance platform we.trade.

Kudos to Coindesk for reporting the Chapter 11 filing first.