Applicant Information
Name: Fortunafi Capital LP - Class T-Bill
Address (Headquarters): 2255 Glades Road, Suite 324A
City, State, Postal Code: Boca Raton, Florida 33431
Country: United States
Website: fortunafi.com
Primary Contact
Name: Nick Garcia
Title: CEO
Country: USA
Email: nick@fortunafi.com
Key Information
Expected Yield: Performance of underlying assets expected to track with U.S. Treasury Bill yields, which currently range from approximately 5.2-5.5%.
Expected Maturity: Fortunafi Capital LP (the “Master Fund”) is an open-ended private fund. The underlying asset exposure of the Class T-Bill interests is to United States Treasury Bills with up to 12 month maturity.
Underlying asset: The Class T-Bill offering is currently invested in US Treasury Bills with maturity of up to 4 weeks. The Class T-Bill offering may also invest in Treasury Bills of up to 12 month maturity, or exchange-traded funds that primarily pursue or track investments in Treasury Bills.
Minimum/Maximum transaction size: $100,000 minimum initial investment, no maximum
Current AUM for product: $7.2 million
Current AUM for issuer: $10.4 million
Volume of transactions LTM: Investor transactions total approximately $27.7 million across 34 transactions.
Source of first-loss capital: N/A
Basics and Background
1. How will this investment improve Arbitrum’s RWA ecosystem?
At Fortunafi we fundamentally believe that in order to successfully scale an RWA ecosystem, composability with DeFi is a critical ingredient. Given Arbitrum’s success in scaling DeFi we believe that Arbitrum is extremely well positioned to be the #1 chain for RWA. Fortunafi has been working closely with Arbitrum on implementing a best in class solution for native RWAs on Arbitrum. We believe Fortunafi is the only offering that enables all of the following:
- Native Minting & Redemption on ARB
- Fully Compliant Composability with DeFi
- Fortunafi is in discussions with leading protocols on Arbitrum including but not limited to: Jones DAO, Isekai, Gammaswap, Silo, IPOR, and Radiant.
- Transferability enabled for all whitelisted users & protocols
- Open to US & Non US
- Open to individuals & entities
Fortunafi’s wealth of experience in both traditional finance and DeFi grants us the expertise to bring compliant products onchain that facilitate great composability with many existing protocols within the Arbitrum ecosystem. We have been actively collaborating with Arbitrum native protocols for over a year to develop novel yield strategies, new collateral types for lending, and exposure to off-chain yields and other traditional products. Members of the team are highly invested in the Arbitrum ecosystem, greatly align with the vision of creating a composable decentralized financial ecosystem, and are highly motivated to provide the highest quality collateral to the protocols and users of Arbitrum.
2. Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
Nick Garcia (Founder & CEO)
Nick has 10+ years of experience in both fintech & crypto. Nick started off in fintech at Wells Fargo’s Tech & Venture Group. He then led finance & strategy at Zenefits, a fintech & insurtech solution for SMBs, and then was the head of finance at Shippo, a multi-carrier shipping API and led the Series A & B with Union Square Ventures and Bessemer Venture Partners. He started investing & trading digital assets in 2013, founded Space Whale Capital (a venture and liquid trading fund) in 2018, and founded Fortunafi in 2020.
Hugo Bagao, CFA (Capital Markets Lead)
Hugo has nearly two decades of experience in investment management and capital markets. He joined Fortunafi as Capital Markets Lead in 2021. Before joining Fortunafi, he was a Director in the investment team of Kawa Capital, where he spent 7 years managing one of Kawa’s bespoke credit strategies, structuring and executing securitization transactions, and trading across ABS and credit markets. Prior to Kawa, Hugo spent 8 years at INCA Investments, an investment firm specializing in Latin American markets. Hugo is also a CFA charterholder.
Derek Russo (Strategy & Ops Lead)
Derek has 9+ years of experience starting his career at PwC focusing on management and tech consulting in the technology sector. Derek worked with large institutions and startups scaling business functions, driving revenue growth, and integrating processes / systems during pre and post mergers.
Elliot Feeny (Partnerships Lead)
Elliot has 8 years experience of working in crypto as a product manager at Bitcoin Magazine, and most recently leading business development and protocol integrations at Blockdaemon.
Wissam Jarjoui (Director of Engineering)
Wissam has 10+ years of experience working at startups and crypto companies. His experience ranges from building encryption services at Box, leading engineering at Shippo, and heading security and custody at SFOX. Wissam is a primary author for multiple patents, including a patent for digital transaction signing for multiple client devices using secured encrypted private keys (link here).
Service Providers
| Administrator: | NAV Consulting |
| Auditor: | Berkower |
| KYC/AML: | Quadrata |
| Brokers & Custodians: | Jiko Securities |
| BNY Mellon | |
| Coinbase | |
| TradeStation Securities | |
| Bank: | Choice Financial Group |
| Legal Counsel: | Cole-Frieman & Mallon |
| BVI Legal Counsel: | Harney Westwood & Riegels |
| Multi-Party Computation Wallet: | Fireblocks |
| Fordefi | |
| Investment Manager | Fortunafi Capital Management LLC |
3. Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
Fortunafi was one of the first issuers to partner with MakerDAO to back $DAI with RWA.
Fortunafi’s TAP is currently live on Arbitrum, Canto, and Blast.
Fortunafi’s assets are currently used as collateral for several decentralized stablecoins including $NOTE & $DAI.
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.
None.
6. Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
Directors and Officers (D&O) Insurance
Name of insurer or guarantor: Trisura
Aggregate coverage: $1,000,000
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
Members of our team have extensive experience in operating, collaborating with, and investing in decentralized organizational structures. As a company, Fortunafi was the 2nd ever protocol to receive approval from MakerDAO to use RWAs as collateral for minting DAI, was an early user of Centrifuge launching two separate pools backed by a variety of private credit assets, and worked closely with key contributors at Canto to pass governance proposals to use $fBILL and $ifBILL tokens to back their native stablecoin.
10. What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
$7.2 million
11. How many of these assets held are present on Arbitrum One, if any?
Currently $500,000 of tokenized treasury bills ($fBILL) are held 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.
Structure
The product uses a “master-feeder” fund structure. The Master Fund, Fortunafi Capital LP, is a British Virgin Islands limited partnership. Non-U.S. investors are able to subscribe to interests in Fortunafi Capital International LP, a BVI limited partnership (the “Offshore Fund”), and U.S. investors may subscribe to interests in Fortunafi Capital US LP, a Delaware limited partnership (the “Onshore Fund” and together with the Offshore Fund the “Feeder Funds”, and together with the Master Fund the “Funds”). The Feeder Funds invest substantially all of their assets through the Master Fund.
The Funds are not registered, in reliance on Section 3(c)7 of the Investment Company Act. Interests in the Funds will not be registered with the SEC in reliance upon an exemption from the registration requirements of the Securities Act.
The Funds are operated by Fortunafi Capital GP LLC, a Delaware limited liability company, as General Partner. The Investment Manager of the Funds is Fortunafi Capital Management LLC, a Delaware limited liability company.
Description
Investors are able to subscribe to the Feeder Funds using Fortunafi’s Tokenized Asset Protocol (“TAP”). To do so, investors must undergo an onboarding process. Once the onboarding process is completed, investors can use TAP to purchase interests in the Fund’s Class T-Bill, which will be represented by token units named fBILL for the Onshore Fund, and ifBILL for the Offshore Fund (together the “fTokens”).
Onboarding process:
- KYC/AML and Checks: user connects wallet to TAP and undergoes a process of identification and other checks. U.S. users also undergo an accreditation check.
- Subscription Documents: users that pass Step 1 receive subscription documents to complete.
- Whitelisting: Once Steps 1 and 2 are complete and approved, the user’s address is whitelisted.
- Chain Selection: user is now able to select from various chains and invest in Class T-Bill interests, minting fBILL or ifBILL tokens directly on the selected chain. Currently, available chains on TAP are Arbitrum, Blast, and Canto.
The Funds’ net asset value is calculated daily and the value of the fBILL and ifBILL tokens will change with the net asset value of the Class T-Bill interests.
Subscriptions are processed and tokens minted on the same business day they are requested through TAP, with a 2:00pm ET cut-off. After the cut-off, subscriptions are processed the following business day.
Redemptions may also be requested by using TAP, with same business day processing done before the 2:00pm ET cutoff, if there is available liquidity in the Funds. Otherwise, redemptions are expected to be processed the following business day. Subscriptions and redemptions may be done in USDC or USD.
Underlying Assets
The Class T-Bill invests primarily in debt and fixed income securities issued by the United States Department of the Treasury (“Treasury Bills”) with up to 12 month maturity. It may also invest in exchange-traded funds that primarily pursue or track investments in Treasury Bills.
Current holdings of the Class T-Bill portfolio:
| CUSIP | Name | Maturity Date |
|---|---|---|
| 912797JV0 | US Treasury Bill | 5/07/2024 |
| 912797JX6 | US Treasury Bill | 5/21/2024 |
2. Do investors have any shareholder, investor, creditor or similar rights?
Investors own limited partnership interests in Feeder Funds, and are therefore owners of the Funds. The Feeder Funds in turn hold limited partnership interests in the Master Fund. All bank accounts and brokerage accounts are in the name of the Master Fund. The Funds are the counterparty to the service providers, which act in the interest of the Funds.
The fund structure is bankruptcy remote from the Investment Manager. In the event the General Partner is dissolved or declares bankruptcy, the Funds would be dissolved and liquidated, with each investor receiving their respective interests in USDC or USD.
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.
The product uses a “master-feeder” fund structure.
| Master Fund: | Fortunafi Capital LP, is a British Virgin Islands limited partnership, recognized by the BVI Financial Services Commission as a professional fund. |
| Offshore Fund: | Fortunafi Capital International LP, is a British Virgin Islands limited partnership, recognized by the BVI Financial Services Commission as a professional fund. |
| Onshore Fund: | Fortunafi Capital US LP, a Delaware limited partnership. |
| US Regulation: | The Funds rely on private offering exemptions from registration under the Securities Act. The Funds also rely on an exemption from the definition of “investment company,” pursuant to Section 3(c)(7) of the Investment Company Act. |
| Investment manager: | Fortunafi Capital Management LLC, a Delaware limited liability company. The Investment Manager is currently not required to be a registered investment advisor with the SEC. The Investment Manager plans to register with the SEC once the minimum AUM thresholds are met. |
| Documentation: | Private Placement Memorandum and Subscription Documents |
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.
Yes, assets of the Fund’s Class T-Bill portfolio are held by BNY Mellon through Jiko Securities, in the name of the Master Fund which is a separate entity from the Investment Manager. The Master Fund is owned by the Feeder Funds, which are in turn owned by investors.
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.)?
Treasury Bills held by the Fund are currently held at BNY Mellon, the largest custodian bank in the world.
The Fund’s cash is held in accounts at Choice Financial Group, a FDIC member bank eligible for FDIC insurance.
6. Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
The Funds currently only issue the Class T-Bill interests.
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.
8. Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
The Offshore Fund is domiciled in the BVI and is not subject to any BVI tax.
The Onshore Fund is a limited partnership domiciled in the United States and is expected to be treated as a partnership for U.S. Federal income tax purposes. Each investor in the Onshore Fund will be required to report on their own annual tax return their share of the Fund’s taxable income or loss. A Schedule K-1.
Investors should consult their own tax advisers with respect to the tax consequences of investing in the Funds.
9. Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
Redemptions may be requested by using TAP, with same business day processing done before the 2:00pm ET cutoff, if there is available liquidity in the Funds. Otherwise, redemptions are expected to be processed the following business day. Redemptions may be done in USDC or USD.
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.
The underlying assets are U.S. Treasury Bills, the most liquid asset in financial markets. Treasury Bills are also considered the safest and most stable asset class in the market. The short duration of the assets also minimizes interest rate risk.
The Funds are often able to settle redemptions as quickly as the same day, though that depends on timing as well as the conversion and transfer speed of service providers.
12. If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
The minting and redemption process is fully automated by smart contracts. This creates a transparent and auditable trail of TAP on a daily basis. Administrative operations within TAP require the use of Fireblocks and FordeFi MPC technology and multiple admin approvals for each transaction.
13. Does the product rely on any derivative product (swaps,OTC agreements)?
No.
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.
| Administrator: | NAV Consulting |
| Brokers & Custodians: | Jiko Securities |
| BNY Mellon | |
| Coinbase | |
| TradeStation Securities | |
| Bank: | Choice Financial Group |
| Multi-Party Computation Wallet: | Fireblocks and Fordefi |
| Investment Manager: | Fortunafi Capital Management LLC |
15. Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
The Fund’s structure and several processes mitigate operational risks and protect investor capital, including:
- The Funds are required to comply with BVI FSC regulation, including KYC/AML requirements.
- The Funds have an independent Money Laundry Registered Officer which audits compliance with KYC/AML standards.
- Key personnel undergo annual compliance training.
- The investor onboarding process includes KYC/AML, sanctions checks and wallet screening, with risk score outputs and reporting.
- No investor is able to interact with the TAP without completing onboarding and being whitelisted.
- Administrative operations within TAP require the use of Fireblocks and FordeFi MPC technology and multiple admin approvals for each transaction.
- All management of brokerage and bank accounts require multiple key personnel approvals and access is limited.
- All accounts are in the name of the Funds, completely separate and remote from the Investment Manager
- Underlying assets are held with a reputable custodian.
- Class T-Bill investment mandate does not allow deviation from the objective of exposure to US Treasury Bills.
- Established valuation policy, followed by the Administrator.
- Key personnel have multiple decade experience in investment decision-making and acting as fiduciaries.
Performance reporting
1. What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
The Funds target a gross yield in line with U.S. Treasury Bills, which are the primary underlying asset held by the Funds.
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.
The Administrator provides monthly reports to investors. The report depicts the investor’s beginning and ending investment balance, the month’s P&L and any capital movements.
3. Who provides the performance reports in respect of the underlying assets?
The Administrator, NAV Consulting, prepares the Funds’ net asset value reports each business day. Monthly reports are prepared by the Administrator and distributed directly to investors.
4. Describe any formal audit process and timing of such audits.
The Funds’ auditor is Berkower. Audits are done on an annual basis.
Pricing
1. Provide a copy of your standard contract, or one similar to what is being proposed here.
Fund documents are provided to prospective investors during the onboarding process. They can also be shared confidentially.
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).
Management fee of 0.25%, paid monthly.
Other fund operating expenses are capped at 0.15% of assets (ie. 0.15% or less). Any expenses above the cap are paid for by the General Partner.
3. Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
Fund operating expenses up to the 0.15% cap are paid out of interest earned from underlying assets. Such expenses are accrued daily and paid upon receipt of invoices. Management fees also accrue daily and are paid monthly.
Smart Contract/Architecture
1. How many audits have you had and name of auditors? Please provide a copy of reports.
Fortunafi’s Tokenized Asset Protocol’s smart contracts have been audited by Halborn (link to report)
2. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
Fortunafi assets are permissioned by a whitelist. Users must undergo KYC/AML checks, including sanction checks and wallet screening. U.S. investors must also undergo an accreditation check.
3. Is the product present on several chains? Are there any cross chain interactions?
Fortunafi is currently live on Arbitrum, Blast, and Canto. We will soon enable cross-chain transfers allowing users to bridge Fortunafi assets across chains.
4. Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem.
Fortunafi assets are currently being used as collateral in the Canto Lending Market to mint their native stablecoin, Note. Soon these assets will also be integrated into more lending markets, decentralized perpetual swap exchanges, and yield vaults on Arbitrum and other chains.
5. How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
Fortunafi’s Tokenization Asset Protocol (TAP) is secured by admin privileges and restricted to investors who pass KYC/AML and other accreditation requirements.
Fortunafi’s management of admin privileges via our TAP uses Fireblocks and FordeFi MPC technology and multiple admin approvals for each transaction performed on TAP.
Access to brokerage and banking accounts requires multi-factor authentication, and operations in such accounts require approvals from multiple key management personnel.
6. Is there any custom logic required for your RWA token? If so please give any details.
No. The fBILL and ifBILL tokens are ERC-20 standard compliant, with whitelisting built in.
Supplementary
1. Please attach any further information or documents you feel would help the screening committee or ARB tokenholders make an informed decision.
N/A