5ire investors angry over delay on promised refunds. CEO blames mystery fund

Pratik Gauri, CEO of Dubai-headquartered 5ire, told investors last week that problems with an unknown fund are preventing the company from processing refunds for token investors.

Gauri, who was addressing investors on Telegram, did not name the fund, citing a non-disclosure agreement. He said the fund was supposed to transfer money to 5ire on July 12. Refunds to investors were scheduled to begin on July 15.

5ire founders (from left) Vilma Mattila, CEO Pratik Gauri, and then-CTO Prateek Dwivedi / Photo credit: Vilma Mattila’s Instagram, Pratik Gauri’s Facebook, and Prateek Dwivedi’s LinkedIn

“The fund is delaying our payments,” he said. “They are saying they’ll pay but it won’t be in one shot due to crypto winters and current market conditions.”

Gauri added that while the Layer 1 blockchain firm was considering its legal options, a lawsuit would not solve the problem. He said 5ire was still speaking to the fund.

While Gauri did not specify what the market conditions were, he did say the “raise” had happened when Bitcoin was at US$50,000. The price has since fallen to US$30,000.

Gauri said 5ire was looking at alternative funds to raise cash.

Chief marketing officer Utkarsh Amitabh told Tech in Asia via email that 5ire had raised US$121 million in total to date, with US$100 million from a series A round and US$21 million from a range of private token (non-equity) investors.

He said the amount 5ire needed to raise to cover the refunds was “a small fraction of the US$21 million raised for tokens.” Amitabh had previously told Tech in Asia that only 5% of investors had sought a refund.

How much cash does 5ire have?

However, 5ire’s inability to pay the refunds raises questions about the cash position of a company purportedly worth US$1.5 billion. 5ire says it has only received the first tranche of US$20 million – divided into two payments – from the series A investor, UK-headquartered Sram & Mram Group.

But Sram & Mram’s ability to invest the agreed-upon amount has also been brought into question.

Last week, Amitabh said 5ire had deferred the second tranche, claiming it did not need the infusion because it still had money left over from the first transfer.

According to Amitabh, the terms of the series A round and the private token sales prevent 5ire from using the funds “for anything other than tech, marketing, and community building.” In short, the funds cannot be used to refund token investors.

It is unclear, however, why 5ire offered to pay token holders a refund without having the funds to do so. The company had originally allowed investors to apply for a refund in April. 5ire did not respond to repeated emails asking for clarification on this point.

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