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50 Shades of Trust: Grayscale & The Nahmii Fakeout

Confusion and subterfuge abounds in this crypto world we live in. Here’s a possible new kind of attempt at price pumping.

Grayscale, which offers investment products for a handful of cryptocurrencies in the form of investment trusts, has been busy since late 2020 setting up legal entities to lay the groundwork for similar offerings of other digital assets. When they announce, the tokens they unveil for these new investment vehicles usually see a nice bump in price. This may be driven by the new demand volume, but is probably more attributable to traders rushing in to capture some of that FOMO premium. I guess that’s a type of demand too.

When these new legal entities are formed, there’s a delay in the actual launching of the product by Grayscale. Since company formation is a matter of public record, and Delaware is the go to state for many individuals thanks to their business friendly laws, this creates the opportunity for people to see if they can get a head start on the market by checking these public filings. 

On April 1st, 2021 there was a new company formed in Delaware with Grayscale in the name:  GRAYSCALE NAHMI TRUST (NII) LLC. 

Delaware Filing

Could this be Grayscale telegraphing their interest in putting together a fund around Nahmii? This would fit in with other Grayscale offerings; now that they have products around all the major coins (BTC, ETH, LTC, BCH, and XRP although they shut that one down) they seem to be taking a look at a lot of projects that offer interoperability and scaling (ADA, ATOM, DOT, XTZ, XLM). And if your reaction to Nahmii was similar to mine, it was probably something like, “what the hell is Nahmii?”

As we’ll see, I don’t think there’s too much of a need to dive into that question, so here’s the blurb on their Coin Market Cap page:

nahmii is a revolutionary Layer-2 scaling protocol for the Ethereum blockchain, which provides unrivalled throughput, low latency, instant finality and predictable fees. The system is live and ready to build on today, with plans to bring nahmii’s raw scaling power to both Bitcoin, NEO and Libra in the near future.”

That sounds super neato and generic. They’ve been around since 2018, haven’t seen to have made much of a splash and have a very thinly traded NII/ETH pair on Uniswap. It doesn’t seem like something Wall Street investors would be clamoring for.

There’s two clues here as to what this actually is. One is perhaps accidental, but the other is more useful. Taking the latter first, all of Grayscale’s investment products are formed under a Statutory Trust. Yes, this entity for NII has Trust in its name and otherwise follows the naming convention employed by Grayscale, but it’s actually a Limited Liability Company (LLC). It’s my understanding that the only way Grayscale can offer the ETF-esque products it does is because they were formed under a statutory trust. Investors in these aren’t buying the digital assets directly, but are buying shares in a trust that owns the underlying asset.

Then there’s this article out today. Here’s the gist:

“the price of NII has more than doubled in the last 24 hours to $0.01, with a 24-hour trading volume of $20.2 million.”

 

Perhaps the other clue was all we needed: This company was formed on April Fool’s day.

I’ll be back tomorrow with a more comprehensive look at this and dive into some of the shifty market movements around these shenanigans. Be sure to follow here to catch it.

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