- Popular crypto exchange Mara has crashed despite high expectations of the startup
- Led by Chinyere Nnadi, the platform went down with $23 million of investors’ money
- Many reasons were cited for the crash, including outrageous salaries and a bloated workforce
At the height of the crypto boom of 2021, a new crypto exchange called Mara (CoinMara Inc.) was born. Mara had a simple goal: be a pan-African exchange poised to “build Africa’s crypto economy.” Given that Web3 is set to take over the future and young Africans should not be left behind, the platform was well received and seen as one that would stay on for a long time.
Mara had a great team of founders, at least on paper: Chinyere ‘Chi’ Nnadi, Lucas Llinás Múnera, Kate Kallot, and Dearg OBartuin.
With this team and the promise it held, it was easy to convince big investors to throw in their money. So, in May 2022, Mara raised $23 million from Alameda Research, the trading arm of FTX, Coinbase Ventures (yes, the popular Coinbase, and 100 other investors at a pre-money valuation of $70 million.
But just two years after the money came in, according to TechCabal, the company crashed: the $23 million they raised finished with no new revenue coming in or investors bringing in new cash; Chineyere Nnadi (who was the CEO) floated another platform called Jara; and two cofounders left the exchange in early 2023. The cofounders would later claim that Nnadi floated Jara to run away from Mara’s liabilities.
Reckless spending
One of the bedrocks of Mara’s failure, according to sources quoted by TechCabal, was reckless spending, bloated workforce and remuneration.
But Mara was actually on track to success when it launched the Mara Wallet in February 2023. The company claimed at the time that the wallet had “4 million verified users.”
“Mara could have been something extraordinary, but its CEO took it down a dark and rotten path,” those co-founders said in a note to investors.
One of the routes on that “dark and rotten path” was the quick incineration of cash. The company spent money like ‘it printed it’.
In 2022 alone, Mara lost $15.9 million, according to a copy of an audited financial statement sent to investors. There was no revenue because, as it said, it did not launch any products that year.
Mara spent mind-blowing $9.1 million on salaries, bonuses, and allowances (huge figures for a startup with no tangible revenue). Mara had 130 employees, according to sources quoted by TechCabal.
In an investor report, Nnadi wrote: “We [paid high salaries] to attract talent [from well-paying companies like Apple and competitors like Yellow Card] but they didn’t always deliver.”
Investors refuse to bring new cash
At the end of 2022, Mara had just $5 million left in cash. So in early 2023, it started fundraising efforts. But the efforts hit brick walls. No new investor cash came in so the financial crisis worsened.
In June 2023, it finally decided to cut down its workforce so it fired it’s marketing department. But the crisis continued to the point that it owed vendors who provided technical services like compliance and communications tools over $3 million, according to sources.
Now those owed by Mara are considering a Chapter 8/11 involuntary bankruptcy claim against the company, according to TechCabal.
The 4 million verified users Mara claimed its wallet had were not real.
“At least 75% of the 4 million verified users Mara reported it had were fraudulent accounts. The financial incentive of the company’s referral program encouraged users to create fake Mara wallet accounts,” one former executive was quoted as saying.
At this point, Mara could not take it again; the crisis was so deep-ingrained, so it had to say goodbye to its users.
One of Mara's community managers (with no name) sent a parting message to Mara’s over 10,000 Telegram group community members: “Mara no longer exists.” The manager then pleaded with them to download Jara app (a non-custodial crypto wallet). To convince the community members, the manager added that “the company’s investors are aligned with the new vision.”
What of investors’ funds?
Well, the cofounders who had left in early 2023 alleged that Nnadi created Jara to run away from liabilities.
According to two people quoted by TechCabal, Nnadi has made an offer to Jara to transfer the tokenized shares of almost 100 individual investors and the equity of Mara's institutional investors. He also stated that he had put $700,000 of his own money into Jara.
Nnadi also had excuses for investors: floating Jara after Mara’s death was meant to help them move past the “shoddy engineering work of the past and be more authentic to how Africans transact.”
He had another excuse: employees hired to work on the over-the-counter trading product stole $600,000 from Mara’s first OTC transaction.
But there was no excuse for the humongous salaries that executives and Nnadi himself earned in a company that was still in the building phase and had no serious revenue stream.
Here’s it: the company’s 2022 financial statement showed directors earned a combined $2.6 million. Out of the five C-suite executives it had, three earned $170,000 each; the fourth earned $120,000, and the fifth earned $600,000 annually, amounting to $1.23 million. The remaining $1.3 million was suggested to have been earned by Nnadi (this salary was clearly not mentioned in the statement, which was really suspicious).
Indeed, this is the story of a company with huge potential that fell off the way.
4 things to know about ‘failed’ $DAVIDO meme coin
Meanwhile, TheRadar earlier reported that Afrobeats superstar David Adeleke, popularly known as Davido, launched his own meme coin.
However, the euphoria didn’t last long as the coin failed spectacularly for a number of reasons which is not unrelated to Davido offloading 121.88 million $DAVIDO for 2,791 SOL to make $474,400 instantly.
