Applicant information
Name: Chateau Capital
Address (Headquarters): Aquilino de la Guardia Street, Ocean Business Plaza Building, Floor 23, Suite 23-01
City, State, Postal Code: Panama City
Country: Republic of Panama
Website: www.chateau.capital
Primary contact Name
Name: Alex Valaitis
Title: Co-founder, COO
Email, Telegram, Forum, & other methods of contact:
Email: alex@chateau.capital
Telegram: @ siliconcowboy
Twitter: alex_valaitis
Forum: @alex_valaitis
Key Information
Expected Yield: CRR.D has an expected return of ~4.7% varying daily please consult Hashnote’s website usyc.hashnote.com to see current return rate.
Expected Maturity: This product has a T+0 to T+1 redemption period into USDC or PYUSD. Atomic on-chain instant redeem is also available during market hours for limited size.
Underlying asset: CRR.D provides Arbitrum investors access to Hashnote’s US Yield Coin (USYC) which gives holders exposure to the Short Duration Yield Fund (SDYF). This instrument generates yield by tokenizing investments into US Treasury Bills, repurchase (repo) and reverse repurchase (reverse-repo) agreements.
Minimum/Maximum transaction size: Hashnote’s USYC product typically has a $100,000 minimum, but Chateau’s CRR.D allows for as little as $1 per investor.
Current AUM for product: $46,050,820
Current AUM for issuer: $46,050,820
Volume of transactions LTM: $46,050,820 (whitelist only)
Source of first-loss capital: N/A
Basics and background
1. How will this investment improve Arbitrum’s RWA ecosystem?
Arbitrum is seeking to diversify its treasury into stable, liquid and yield earning assets. Chateau’s Reverse Repo product (CRR.D) checks all of these boxes by providing a 5.24% yield and offering T+0 redemption. Furthermore, CRR.D has a minimum investment size of $1, and is freely tradable and composable once minted.
CRR.D is a debt product launched by the Chateau Capital team, an Arbitrum-native RWA platform that seeks to bring institutional-grade debt and equity instruments on-chain. We focus heavily on compliance and DeFi composability, to ensure that we are building a platform that is in line with Arbitrum’s ecosystem.
We are working directly with Hashnote which is a leader in the institutional DeFi space, with over 50 years of TradFi experience and tens of millions of $ in AUM. By bringing this product to the Arbitrum ecosystem, we also open the door for a deeper relationship between Hashnote and Arbitrum (currently they are focused on mainnet).
There’s also 2 key aspects that we believe are worth emphasizing:
(i) Chateau is an Arbitrum-first platform. Unlike other projects that have chosen to prioritize other blockchains, the Chateau team is unapologetically focused on Arbitrum DeFi. Choosing Chateau as a service provider would send a strong signal to teams as to why they should focus on Arbitrum.
(ii) Chateau has a wider range of products than any other service providers. To truly drive more TVL via RWAs, Arbitrum must eventually expand beyond basic debt products. We have already launched Chateau Alternative Debt (CHAD.D) in partnership with Wall Street firm Covenant Venture Capital BVI. The product has a preferred return of 15% (averaging 18-21% since 2011) with no principal drawdown.
Furthermore, we will soon be launching private equity products including: OpenAI, Anthropic, MenloMicro, etc. We believe these RWA equity products will unlock massive demand that the current set of debt products cannot drive.
2. Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
Chateau team:
Hao Jün Tan, Co-founder and CEO
Hao is a full-stack software engineer and multi-time crypto founder. He was an early employee of Polybird, one of the first global marketplaces for digital asset securities. He graduated from the NYU Stern school of business, which has been crucial for driving deal flow with Wall Street institutions to bring their top RWA products to the Arbitrum ecosystem.
Alex Valaitis, Co-founder and COO
Alex has deep product & operations experience from leadership roles at silicon valley companies including LinkedIn and Intuit. He is the former COO of DeSo, a layer-1 blockchain that raised $200M and is currently listed on Coinbase. Alex has also built a large following in the crypto community from publishing numerous blockchain reports (50K+ Crypto newsletter subs, 37K Twitter followers).
Zeev Kirsh, Co-founder and CLO (Chief Legal Officer)
Zeev is a NY Bar attorney and opportunity strategist specializing in securities law, BSA/AML compliance, and token issuance. He graduated from Columbia Law, and worked on Bear Stearns Liquidation and Lehman Bankruptcy in 08’. He was the General Counsel at Brock Pierce’s DNA Fund and multiple other crypto offerings. Publications here.
Tyler Fischer, Software engineer
Ty is a full-stack engineer with experience working across multiple blockchain ecosystems including Ethereum, Fantom, and DeSo. He also brings experience from the TradFi world after working at LSEG Data & Analytics, which is one of the world’s largest providers of financial markets data and infrastructure.
Lukas Nyberg, Software engineer
Lukas is a skilled frontend engineer with a focus on UI/UX, analytics, and blockchain. He brings a wealth of experience from working with diverse entities, including the Norwegian Block Exchange and ApeSpace, showcasing his expertise in creating innovative and user-centric solutions in the FinTech sector.
Other Service Providers:
Asset Manager: Hashnote International Short Duration Yield Fund Ltd.
From Hashnote USYC Application Hashnote International Short Duration Yield Fund Ltd (“HISDYF”) is a mutual fund registered with the Cayman Islands Monetary Authority (CIMA) that deploys investment strategies to earn approximately the effective Federal funds rate and provide intra-day liquidity. HISDYF invests in short-dated U.S. Treasury securities and repo/reverse repo transactions through its U.S. prime broker.
Please review Hashnote’s Application for a complete list of service providers for USYC.
KYC / AML: Quadrata, NAV Consulting, LMO Consulting
3. Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
Both the Chateau Capital and Hashnote teams have extensive track records across the TradFi and crypto domains. We’ve outlined the key officers experience in detail above, but a few to highlight:
- The Hashnote team currently manages tens of millions in AUM across its products including $46M+ in their reverse repo product.
- The Hashnote execs also have extensive experience managing funds across numerous large banks and family offices (see above).
- Karl Douglas is a wall-street veteran who is an advisor to Chateau. He is currently the CIO of Covenant Venture Capital and manager at Insight Family Office. He has over 35 years of experience structuring debt and equity transactions.
- While COO at DeSo, Alex helped oversee the $200M treasury and was responsible for the $50M ecosystem fund.
References:
Hack VC
Covenant Venture Capital
4. Has your entity or its officers/key contributors been subject to an enforcement action, criminal action, or defaulted on legal or financial obligations? Please describe the circumstances if so.
No
5. Describe any conflicts of interest for your entity and key personnel.
N/A
6. Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
N/A
7. Historical tracking error in your proposed product, or similar to that being proposed Product 2024 YTD 2023 2022 2021
N/A
8. Brief reason for above tracking error
N/A
9. Please describe any experience your firm has in working with decentralized organizational structures
Our team has been heavily involved with a number of DAOs over the years. For instance, Alex was one of the first members of ATX DAO, one of the most successful city DAOs.
Alex and Ty also worked on a platform called OpenFund (originally called DAODAO), which allows anyone to spin up their own DAO in just a few clicks, and accept investment in any major cryptocurrency.
10. What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
To date we’ve raised 7 figures from a top Venture Capitalist (please DM for the exact figure and the name, since we haven’t publicly announced yet).
Our CHAD.D product has 6 figures in TVL and Hashnote’s reverse repo product has over $46M in AUM alone. Hashnote has also raised $5M in venture funding.
11. How many of these assets held are present on Arbitrum One, if any?
All of Chateau’s assets are currently on Arbitrum One.
Plan design
1. Please describe your proposed product, including a description of the underlying assets and, if more than one asset, the proposed allocation among assets and general investment guidelines. Where appropriate, include targeted maturity mix and credit quality. Attach supplementary documents as appropriate.
Chateau Reverse Repo product (CRR.D) provides access to Hashnote’s Short Duration Yield Fund (USYC).
Hashnote Short Duration Yield Fund invests in short-term U.S. Treasury Bills and performs repo / reverse repo activity as the underlying asset of the USYC token.
USYC earns short-term risk-free rate returns. The fund benefits from the transaction speed, transparency, and composability of tokenization while eliminating virtually all of the protocol, custody, regulatory, and credit risks associated with other token projects.
2. Do investors have any shareholder, investor, creditor or similar rights?
No
3. Describe the legal and contractual structuring for your product including regulatory bodies overseeing your business and the product and identifying all legal jurisdictions interacting with your product. Attach supplementary documents as appropriate.
Regulatory oversight:
Please consult the Hashnote USYC application for appropriate response to this question.
4. Would Arbitrum’s assets be bankruptcy remote from your own entity and its officers/key contributors? If so, please explain the legal and contractual basis. On a confidential, non-reliance basis, provide any third party legal opinions to support the conclusions.
Legal and Contractual structuring:
Please consult the Hashnote USYC application for more information on the legal structuring of iSDYF. iSDYF investments are bankruptcy remote.
5. How are Arbitrum’s assets protected vis-a-vis the bankruptcy of the brokerage or applicable financial institution (e.g., bank deposit insurance, securities insurance, etc.)?
(i) Segregated Accounts:
Hashnote ensures that all assets invested in the USYC product are held in segregated accounts. This means that Arbitrum’s assets are kept separate from the assets of Hashnote and other investors, thereby safeguarding your investment in the event of a bankruptcy of the brokerage or financial institution.
(ii) Custodial Arrangements:
Hashnote partners with highly reputable custodians, such as BNY Mellon, to manage the custody of the assets. Additionally, Komainu provides custody support for USYC, offering elevated capital efficiency for institutions. These institutions are well-regulated and adhere to stringent financial standards, further reducing the risk of financial failure.
Custodial Oversight: The custodians are subject to regular audits and regulatory oversight, ensuring that they maintain high levels of financial health and operational integrity.
6. Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
Hashnote Reverse Repo USYC is managed separately from other assets. Please consult Hashnote’s USYC application for more information on the underlying assets.
Chateau Capital has also launched the following assets on Arbitrum, with more equity listings in the pipeline:
Chateau Alternative Debt (CHAD.D)
There is no priority relationship between CHAD.D and CRR.D. Both assets have entirely separate smart contracts and SPVs set up that do not interact at all.
7. Provide a detailed cash flow diagram that shows the flow of funds from ARB/Fiat conversion, investment in underlying asset, payment of expenses, sale of underlying asset, and repayment (Fiat/ARB conversion), including the counterparties and legal jurisdictions involved.
Please consult the Hashnote USYC application for information on subscription and redemption flows.
8. Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
The exact tax consequences depend on the tax jurisdiction of Arbitrum DAO and the legal entity making this investment
When transacting in Hashnote’s USYC product and receiving yield, the anticipated tax consequences are as follows:
Capital Gains Tax: If USYC tokens are sold at a profit, the gain may be subject to capital gains tax. The tax rate depends on the holding period: gains on tokens held for less than a year are taxed as short-term gains at ordinary income rates, while those held for longer are taxed at lower long-term capital gains rates, which range from 0% to 20% depending on your income.
Income from Yield: The yield generated from USYC, derived from investments in U.S. Treasury Bills and repo agreements, is treated as interest income, which is taxable at the federal level as ordinary income. However, interest from U.S. Treasury Bills is exempt from state and local taxes.
Hashnote will generate the necessary tax forms for Arbitrum at the end of the year.
9. Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
Liquidation of CRR.D tokens into USDC can occur same day, or T+1 if the redemption request happens past 2pm EST cut off time.
10. What amount of first-loss equity will Sponsor provide to ensure over-collateralization, how is the first-loss equity denominated, and what is the source of capital?
N/A
11. Describe the liquidity and stability of the proposed underlying assets, including anticipated settlement times from the sale of the underlying to the repayment of ARB.
Reverse Repos are the most liquid yield bearing asset in the world, as they represent overnight lending accounts at the Federal Reserve, and can be withdrawn daily unlike T-bills which carry a duration risk. They have essentially 0 stability risk, due to the Fed’s ability to issue currency infinitely. Please review Hashnote’s USYC application for more information on settlement and redemption.
12. If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
The main risks are:
Smart Contract Risk for the ERC7540 CRR.D issuance contract and Hashnote USYC contracts.
Chateau’s mitigations:
i. Audits with reputable firms for the contracts.
ii. Using multisig wallets to custody funds and interact with the contracts.
13. Does the product rely on any derivative product (swaps,OTC agreements)?
Yes, CRR.D is built on Hashnote USYC.
Hashnote is the premier on-chain institutional asset manager backed by the partners of DRW. Hashnote has an experienced in-house Fixed Income Team, with a track record of delivering consistent, risk-adjusted returns and liquidity management.
The fund’s cash and securities are custodied at Bank of New York Mellon and managed by experienced portfolio and liquidity managers. Hashnote’s offshore funds are licensed as mutual funds by Cayman Islands Monetary Authority (CIMA), and its U.S. fund manager is registered as a CPO with the Commodity Futures Trading Commission (CFTC).
14. List all the third party counterparties linked to your assets including and not restricted to prime broker if any, custodian, reporting agent, banks for derivatives or loans and provide primary contact details for the third party counterparties.
Hashnote for the underlying Reverse Repo.
Fireblocks custody for multisig custodial wallet.
15. Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
Performance reporting
1. What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
The performance benchmark is the price of CRR.D which will be updated daily.
2. Describe the content, format, preparation process, and cadence of performance reports. This should include proof of reserves, if appropriate. Please include a sample report.
Performance reports are available in real time, updated daily on Chateau.capital
3. Who provides the performance reports in respect of the underlying assets?
The performance reports originates from Hashnote USYC performance reports, and are available on their website in real time.
4. Describe any formal audit process and timing of such audits.
The fund’s cash and securities are custodied at Bank of New York Mellon and managed by experienced portfolio and liquidity managers. Hashnote’s offshore funds are licensed as mutual funds by Cayman Islands Monetary Authority (CIMA), and its U.S. fund manager is registered as a CPO with the Commodity Futures Trading Commission (CFTC).
Pricing
1. Provide a copy of your standard contract, or one similar to what is being proposed here.
2. Fee summary: Inclusive of the full scope of services requested. Product Fee schedule If asset based Fee calculation for our plan if asset based Annual fee if flat fee Any other fees (including redemption or minting fees)
CRR.D will charge a 0.1% issuance and redemption fee.
3. Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
Fees are only charged upon issuance and redemption.
Smart Contract/Architecture
1. How many audits have you had and name of auditors? Please provide a copy of reports.
Both Chateau and Hashnote have undergone numerous audits across our contracts.
Chateau Audits: Cantina, CD Security, Zellic.io
Hashnote Audits: Cohen & CO, Chainsafe, Sentnl
2. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
Chateau does not serve US persons nor firms. Users are KYCed during issuance (minting) and redemption (burning) with Quadrata (quadrata.com). Quadrata soul bound NFT encrypts user PIIs, as such Chateau can blacklist/whitelist users for issuance and redemption. The CRR.D token is otherwise freely tradable and composable.
3. Is the product present on several chains? Are there any cross chain interactions?
The Hashnote reverse repo product USYC, is available on Ethereum mainnet. We are the first team to help them bring it to Arbitrum as an ERC-20 token.
Our current plan is to remain 100% focused on the Arbitrum ecosystem. Any cross chain interactions will be between Ethereum mainnet and Arbitrum.
4. Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
We plan to make CRR.D tokens fully composable across the Arbitrum ecosystem. We will begin by listing on Arbitrum native DEXs like Camelot, and would also like to integrate with Gearbox and Pendle.
We will also be running a robust points campaign to drive more demand for the CRR.D tokens on both primary issuance, as well as secondary trading.
5. How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
Trusted roles and admins are managed by Chateau’s ¾ multisig managed by Chateau’s exec team.
Users need to trust Chateau Capital’s smart contracts and the integrity of Chateau’s team as custodians through the multisig (Safe) solution. (Fireblocks custody is also available upon request)
Chateau team will mint and redeem CRR.D and pass funds to Hashnote USYC through our multisig.
6. Is there any custom logic required for your RWA token? If so please give any details.
N/A
Supplementary
1. Please attach any further information or documents you feel would help the screening committee or ARB tokenholders make an informed decision.
We are backed by some of the top VC firms and Angels in the industry. Some of them will also be contributing follow-on capital into the CRR.D product directly.
Please DM us for more details, as we have not shared this information publicly yet.