The company behind Axie Infinity, a popular crypto play-to-earn game, raised $150 million in funding this week to help pay back users who lost about $625 million to a hack last week. The creator of Axie Infinity, Vietnamese gaming studio Sky Mavis, has been widely credited with building the most played NFT game of all time, according to the company, with 2.2 million monthly active players.
What is interesting about this funding round is that it was led by crypto exchange Binance – the largest exchange in the world – although Binance had not participated in previous raises of Sky Mavis. More on that later, but first some context.
Existing Sky Mavis investors, including Andreessen Horowitz, Paradigm, and Accel, joined Binance in this round to save Axie, but when news of the hack broke, their involvement was almost unlikely. Those investors already had a financial stake in the game’s success, most notably a16z, which brought in the company’s $152 million. Serie B round last October† Sky Mavis earned a valuation of nearly $3 billion during that round, which meant quite a bit of fanfare for a company that had raised just $7.5 million in total five months earlier.
The hack, which took place on Axie’s Ethereum-based side chain, Ronin, marks the largest known crypto heist to date. Things looked bad not only for Sky Mavis, but also for investors like a16z who had hyped Axie as the future of crypto. It’s starting to look even worse when you look at the demographics of Axie players in general – more than 25% do not have a bank accountthe company said, and many are low-income workers in developing countries who depend on Axie for a significant portion of their income.
It took six days for Sky Mavis or any of its investors to discover that the hack had taken place, which infuriated many, and once the company found out, it immediately looked for solutions. While Sky Mavis announced it was working with law enforcement to investigate the situation, it is rare for funds to be recovered following a crypto hack, much less returned to users. The search process is just too complicated as no information about the hacker is readily available other than the wallet address they used to transfer money from Axie.
It is worth noting that most of the money is still in the hacker’s wallet, although the hacker did appear to be about 2,000 ETH. to be moved from the wallet to the Tornado Cash privacy tool, which allows users to mask their wallet address while withdrawing funds.
So if Sky Mavis couldn’t track down the hacker that way and recover the money, it had to come up with other ways to make up for the shortfall or risk reputational damage by inflicting massive financial loss on its users from its own resources. business. security weaknesses.