We recently caught up with the former CEO of Midas Finance, who built a $300 million crypto-fund that has gone bankrupt with the CeFi market collapse and who claims he has taken all his lessons with him to revive growth back into DeFi with Locus Finance.
Iakov Levin, the CEO at Locus Finance, has offered an analysis of the CeFi market collapse and commented on how he’s ensuring his new DeFi platform is addressing past mistakes.
His feedback and insights aim to benefit the industry by showing them how company failure can potentially lead to new, better beginnings and what strategies founders can employ to harness resilience when dealing with the toughest of challenges.
Our conversation with Iakov Levin is shared below.
Crowdfund Insider: Can you share with us the story of how Midas went under?
Iakov Levin: Founded in 2018, Midas aimed to automate passive income through an interest rate platform and tap into the emerging DeFi market. By 2020, our platform’s popularity surged, and in August 2021, we streamlined features and set interest rates backed by consistent DeFi yields. This led to a rapid rise in assets from $25m to $250m in three months. However, as the alt coin market shifted in early 2022, retail investors sought alternative interest rate options.
During rapid asset growth, we lacked preparation to manage the influx. Hiring investment specialists and diversifying in higher-risk DeFi opportunities strained our resources. The market downturn, including the fall of CeFi platforms like Luna and Celsius, further eroded our position.
A critical failure emerged in spring 2022 when we couldn’t create accurate analytical reports due to complex variables. Despite efforts, the issue remained unresolved until summer. Recognizing accumulated losses, we launched recovery strategies. Ultimately, most CeFi platforms collapsed. By December, following FTX’s exit, 40% of AUM was withdrawn on our platform, ultimately closing Midas. Remaining assets, including Midas tokens, were allocated as refunds to be transferred to Locus Finance.
Crowdfund Insider: How did the bankruptcy of Midas impact you personally, professionally, and emotionally? How did you cope with the aftermath?
Iakov Levin: In the final years at Midas, I battled depression due to overwhelming responsibilities, market uncertainty, and constant adaptations. The toughest period was Midas’ last month. Recovery took 3-4 months; now, with renewed vigour, I focus on my strengths within an exceptional team. Therapy, training, and meditation aided my coping process.
Crowdfund Insider: What were the most significant lessons you learned from the experience? How did it shape your approach to business and decision-making?
Iakov Levin: The most crucial lesson I learned revolves around fear. I hesitated to cut losses during spring, believing I could overcome the problem. Unfortunately, it worsened. Had I found the courage to pivot earlier, outcomes might have differed. My fear was entangled with guilt and shame, distorting my perception of reality.
In an entrepreneur’s journey, clashes between mental models and reality are inevitable. Childhood traumas, especially related to shame and guilt, can limit decisions and opportunities. This realization hit home for me. When launching Locus, I prioritized a grounded approach, avoiding centralized decision-making prone to cognitive errors over time.
Crowdfund Insider: Did you receive any support or advice from mentors, friends, or colleagues during this challenging period? How did their input influence your mindset and actions?
Iakov Levin: There was a lot of support by everyone that I have been working with. And it actually surprised me. Because in my mind this was a disaster and a total failure, professional suicide. But it appears that the world has so much support and understanding. The only advice I was hearing during the first months is to give myself a break. This helped a lot. So now I’m much more in alignment with what I can do and what I cannot do. And in synchronicity with all the support that I can reach out to in hard times.
Right now, every market participant that I’m trying to partner with, for example DeFi Protocols, they are really, really interested in working with our new initiative because we got this unique experience and were brave enough to move forward. This is unexpected for me and I’m really grateful. I’m grateful for another chance that is being presented.
Crowdfund Insider: After going through this transition, what motivated you to bounce back and start again with Locus Finance? What drove you to persevere despite the setbacks?
Iakov Levin: For six months before Midas’ closure, we formulated the Locus model, dubbed CeDeFi Strategies. Despite challenges like our past and financial losses, I initially viewed launching this asset management protocol as a response to guilt and shame from Midas. However, as we built the product, formed a new team, and immersed ourselves in strategy development and protocol collaboration, my true passion emerged. I realized my ultimate goal is to onboard retail investors into DeFi, granting global access to nascent yet transformative technology. Embracing this innovation and nurturing it for users’ long-term prosperity drives me. With polished products, an insurance fund, and resilience against DeFi’s long-term risks, my vision propels Locus to potentially become a premier asset management platform over the next two decades, invigorating me with purpose and determination.
Crowdfund Insider: How have you taken measures to avoid repeating those mistakes in your current endeavors?
Iakov Levin: The most important measure of not repeating the same mistakes is that we are building fully decentralized protocol, which means that there is always full transparency on the sources of yield, full transparency on the assets in each strategy, transparency on the rules and how the strategy is managed. So basically, we are not managing investments, we are building products. And this liberates me from so many things, because when you have assets that you need to manage, especially if you need to sustain specific returns, it’s so much pressure on everyone in the investment department, including myself. And as an entrepreneur, I’m a huge risk taker, which is not always great in leading investments.
And in this case, by liberating myself from managing assets, I’m making a huge favor for our users, for myself, for my family. We really try to capitalize on all the knowledge that we gained to get and create the framework and the product that would fit this in the most transparent, easy-to-use way. So the mistakes and miters will never occur again, because it’s a different product. And right now, on the start, we have a much better team. A lot of my mistakes were due to low executive skills. I’m more of a visionary guy. But now we have one of the best executive managers, who is the CEO of Locus Finance. He does so well in managing deadlines and making complex decisions based on the factors that he has. And I’m really grateful to have him as a co-founder in this case. I feel our partnership is highly beneficial for the sustainability of our new product.
Crowdfund Insider: How do you approach managing and mitigating risks now, given your past experience with bankruptcy? How do you strike a balance between innovation and prudence?
Iakov Levin: DeFi, since its inception, presents unexpected risks and outcomes. However, it’s beneficial as the industry self-regulates, fostering sustainable and transparent investment instruments. Risk management involves quick reaction to unusual behavior, utilizing protocols and a monitoring system for adaptive liquidity management. Dealing with DeFi’s inherent long tail risk, I advocate creating an insurance buffer against hacks and rug pulls, and implementing it into the product.
While I’m growing more conservative, risk-taking remains a strength in entrepreneurship. Effective risk management requires a dedicated team, striking a balance between innovation and careful oversight. Colleagues covering risk management ensure equilibrium, fostering both innovation and risk control in the system.
Crowdfund Insider: Looking back, do you believe the bankruptcy was a necessary part of your entrepreneurial journey? How has it shaped your character and your ability to lead and inspire others?
Iakov Levin: The accumulation of my mistakes as a less experienced entrepreneur led to Midas facing numerous challenges. These mistakes compounded, making it more practical to start anew rather than fix the existing issues. Large systems possess their own inertia, which is difficult to alter. Creating a more streamlined, smaller system took months but was efficient.
Additionally, my identity was closely intertwined with Midas, which became constricting and pressurizing. Starting afresh, focusing solely on my strengths and passions, backed by a skilled team, allowed me to leverage the knowledge gained from managing a CeFi platform. This expertise, spanning retail client interactions, protocol engagement, and understanding investor needs, was channeled into crafting a fully transparent new product. This experience has significantly fortified my character, enhancing my self-awareness and bolstering my abilities.
Crowdfund Insider: What are your long-term goals for Locus Finance? How do you plan to continue growing and achieving success?
Iakov Levin: The driving force behind my product creation is the emotional impact of providing a consistent way to generate yield using cryptocurrencies like Ethereum. This opens the door for global exposure to cutting-edge financial technology, freeing up capital and offering psychological liberation. Accumulated wealth can be used for self-improvement, education, travel, or escaping draining jobs, potentially transforming lives. Our platform acts as the nurturing soil for personal growth fueled by resources.
Locus Finance serves as a vital bridge between the retail and institutional worlds and the intricate DeFi landscape. Adapting numerous variables and constructing products such as investment strategies, insurance funds, lending markets, and tokenized real-world assets, we facilitate diversified wealth generation. With strong demand for hassle-free yield products amidst the crypto interest surge, we aim to ease the process, alleviate headaches, and deliver the much-needed market solution post the CiFi market collapse.
Crowdfund Insider: Finally, is there any message or key takeaway you would like to share with our audience about the valuable lessons you learned with Midas?
Iakov Levin: If we think about life decisions in general, the worst decisions that we make stem from the places of our psyche where where we are frozen, where our emotional reactions are frozen, where we are tuning out opportunities or shutting down our own feelings and tuning out your own intuition. In this case my lesson is to trust your intuition and to develop your awareness to have better access to your intuition and your your body knows the answer, the field knows the answer and it’s it’s always out there and you will be able to make it despite what life throws at you.