Applicant Information
Name: ADAPT I LP (“TrueFi tfBILL” or the “Fund”)
Address (Headquarters): 4201 Wilson Boulevard, North Floor 3
City, State, Postal Code: Arlington, VA 22203
Country: United States
Website: Adapt3r Digital - tfBILL
Primary Contact
Name: Marcus Leanos
Title: Chief Executive Officer, Adapt3r Advisors LLC, the Fund’s Investment Manager
Country: United States
Email, Telegram, Forum, & other methods of contact:
Email: marcus@mjl.capital
Twitter: leanos_marcus
Telegram: mleanos
Forum: @marcus_leanos
Key Information
Expected Yield: tfBILL focuses on generating returns from spot treasury bills, optimizing for liquidity by targeting the short end of the curve in today’s rate environment. Our current operating yield (as of 05/01/2024) is approximately 5.26%.
Expected Maturity: The fund works on a strategy that employs buying short term treasuries on a rolling basis. The current weighted average duration is approximately 13 days, consistent with our goal of maximizing underlying liquidity and taking advantage of the current shape of the treasury yield curve.
Underlying Asset: Short-term U.S. Treasury Bills.
Minimum/Maximum Transaction Size: 100,000 (USDC) / N/A
Current AUM for the product: $8,747,217.94
Current AUM for issuer: $8,747,217.94
Volume of Transactions LTM: $17,100,000.00
Source of First-Loss Capital: N/A
All data points are as of 04/30/2024.
Basics and Background
1. How will this investment improve Arbitrum’s RWA ecosystem?
TrueFi tfBILL helps Arbitrum to achieve its objectives of managing treasury into high-quality, highly liquid assets by providing on-chain access to short-term U.S. Treasury Bill yields.
Through STEP, Arbitrum and TrueFi can establish a model for successful investment of DAO treasury into “real world assets” using a crypto-native stack that integrates processes of leading off-chain asset managers (Adapt3r Digital) into open, on-chain financial infrastructure (TrueFi).
As the RWA ecosystem evolves, TrueFi is positioned to facilitate additional RWA activity beyond tokenized T-bills. TrueFi has originated nearly $2B in onchain credit to date (source: rwa.xyz), and built generalized credit infrastructure that suits our needs as the asset manager of tfBILL.
Strategic Compliance and Regulatory Leadership
Consistent with our belief that a tokenized asset is only as strong as the regulatory compliance of its issuer, Adapt3r Digital has crafted tfBILL with a foundational emphasis on compliance. We aim to set the gold standard within the DeFi space for regulatory adherence. This approach not only aligns with stringent financial regulations that come with being a US-domiciled asset manager, but also the investor protections that come with a Professional Mutual Fund registered with the BVI Financial Services Commission. Adapt3r has taken a measured approach to integrations to date, focusing on KYC’d and permissioned ecosystems. By adhering strictly and conservatively to global securities regulation, tfBILL is best positioned to scale with the growth of Arbitrum without interruption.
Commitment to Decentralization
With the launch of tfBILL, Adapt3r Digital leverages the TrueFi protocol’s proven track record of nearly $2 billion in loan volume, which is by far the highest volume as well as one of the longest-lasting RWA ecosystems in DeFi. Consistent with Arbitrum’s vision, TrueFi is the only RWA platform managed exclusively by a decentralized community. The integration of tfBILL on Arbitrum also brings TrueFi’s core private credit marketplace, which is relaunching professionally underwritten pools, as well as a soon-to-debut treasury-backed stablecoin to every user in the Arbitrum ecosystem. By offering an entire ecosystem rather than a single asset, TrueFi’s tfBILL is a logical choice for growing Arbitrum without compromising on quality or overall mission of the endowment.
Treasury Diversification and Composability
In addition to the immediate benefit of investing in US treasury bills, the most liquid and low risk asset globally, the broader TrueFi ecosystem also offers Arbitrum’s treasury a strategic diversification option by providing access to alternative credit products, which contain higher yielding opportunities with established managers. This diversification allows the treasury to tap into an alternative asset class that is not only stable and profitable but also managed through robust risk controls and compliance measures, enhancing the overall security and yield potential of treasury assets.
For more information on the general benefits of tfBILL, please see our docs and also find TrueFi docs here.
2. Identify key management personnel and individual experience. Also, include third parties utilized for managing assets and their qualifications.
Management Personnel
Marcus Leanos
Marcus is the Founder and Chief Investment Officer of Adapt3r Digital. Prior to Adapt3r, Marcus spent a decade in alternative asset management, with a particular focus on financial institution investing. Marcus was an investment associate at EJF Capital, a regulatory event-driven hedge fund in the financial services space (~$10B) located in Washington, DC. His background spans the capital structure, with deep experience in private equity, securitization, and venture capital. Marcus approaches digital assets through a capital markets lens, and brings a unique interdisciplinary expertise in community banks, emerging FinTech, and DeFi. Marcus graduated from Georgetown University in 2017 with a BSBA in Finance and International Political Economics.
Sean McElrath
Sean is the Chief Technology Officer of Adapt3r, where he leads all of the firm’s technical initiatives, covering everything from technical thesis generation to operating validator nodes for portfolio protocols.
Previously, Sean was the Chief Technology Officer and co-founder of Pareto Technologies, a multi-strategy quantitative digital asset management firm. In his role as CTO, Sean led the firm’s systematic strategy development and quantitative trading operations. During his time at Pareto, Sean also led internal development of the critical tools and services that power Pareto’s systematic strategies, which include various arbitrage strategies, managed futures, and high-frequency market making. Sean attended the University of Virginia where he studied Computer Science in the Engineering School. He has over 10 years of experience as a full stack developer and has extensive experience developing algorithmic trading systems and blockchain architectures and applications.
Service Providers
General Partner: Adapt3r Digital LLC
Adapt3r Digital, LLC (the “General Partner”), a Delaware limited liability company is the general partner of the Fund. The General Partner will control the business and affairs of the Fund. The General Partner has delegated to the Investment Manager the responsibility to provide certain investment management and other services to the Fund pursuant to the Partnership Agreement.
Investment Advisor: Adapt3r Advisors LLC
Adapt3r Advisors, LLC, a Delaware limited liability company and an affiliate of the General Partner (the “Investment Manager”) is responsible for evaluating and monitoring investments by the Fund and providing day-to-day managerial and administrative services to the Fund.
Investor Onboarding: Archblock
The decentralized alternatives marketplace built on TrueFi’s open, transparent and immutable financial infrastructure where ADAPT I LP is offered. Archblock also facilitates the KYC/AML and onboarding process for new investors in ADAPT I LP and hosts the website where investors manage subscriptions, redemptions, and all other capital activity related to their investment in The Fund. Learn more about Archblock here.
Underlying Smart Contract Architecture: TrueFi
The open, transparent, and immutable financial infrastructure on which ADAPT I LP is offered and Archblock is built on. Learn more about TrueFi here.
Off-Chain Custodian and Broker: TradeStation Securities
The securities brokerage and qualified custodian responsible for holding off-chain assets and executing trade orders for the fund. TradeStation is US-domiciled and regulated by FINRA.
On-Chain Custodian and On-/Off-Ramp: Coinbase Prime
The custodian and primary on-/off-ramp for the Fund’s stablecoin holdings. Coinbase Prime segregates client assets and operates as a Qualified Custodian.
Fund Administrator: NAV Consulting
The independent, licensed fund administrator responsible for accounting and reporting, including calculating daily Net Asset Values.
Auditor: Wolf & Company PC
Adapt3r has contracted with Wolf & Company PC, a registered, US-based audit firm, to provide independent annual assessments of the Fund’s financial statements.
3. Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
The team at Adapt3r Digital brings a wealth of experience from both traditional and decentralized finance sectors. Prior to founding Adapt3r Digital, our Chief Executive and Chief Investment Officer, Marcus Leanos, was instrumental in managing approximately $6 billion in Collateral Debt Obligations within a multi-strategy hedge fund, EJF Capital. Motivated by a desire to innovate beyond the limitations of traditional financial systems, Marcus transitioned to decentralized finance.
Marcus Leanos currently plays a pivotal role as Chief Investment Officer at MJL Capital, a hedge fund specializing in liquid token strategies and venture capital, alongside Sean McElrath, Chief Technology Officer. In this capacity, they act as active investors in Web3, leveraging their expertise to assist protocols in scaling from inception to liquidity. Their contributions span various areas, including protocol development, tooling, cash management, and go-to-market strategy.
As references, Adapt3r Digital can provide introductions to the following companies and protocols that are investors in the Fund or part of a close working relationship:
- TrueFi
- Archblock
- Wallfacer Labs
- Kinto Protocol (Built using Arbitrum Orbit)
- Plume Network (Built using Arbitrum Orbit)
Additional references are available upon request.
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:
All funds both on- and off-chain are held with regulated, insured counterparties in segregated accounts. The Fund’s cash balances at TradeStation are FDIC insured, and security balances carry SIPC insurance ($500k max cap).
7. Historical tracking error in your proposed product, or similar to that being proposed product:
There is no single index representing the full scope of the treasury yield curve. However, tfBILL is able to avoid tracking discrepancies relative to mutual funds and ETFs because it directly holds spot treasury bills which are subject to current market prices. This ensures a seamless calculation of the Net Asset Value (NAV) by our licensed fund administrator. The fund’s NAV undergoes daily updates, and any issuance or redemption promptly triggers NAV adjustments.
8. Brief reason for the above tracking error:
N/A
9. Please describe any experience your firm has in working with decentralized organizational structures.
In launching tfBILL, Adapt3r has coordinated extensively with TrueFi DAO. We worked with TrueFi governance to (1) onboard as an approved asset manager on the protocol and (2) set up grant funding for open sourcing legal documents that can help other RWA asset managers.
As a crypto-native asset manager, Adatp3r Digital and its affiliates are highly active in the Web3 ecosystem. Through our own liquid token investing, venture capital strategies, and tokenization products, we have formed active, deep relationships with a range of DAOs. tfBILL itself is integrating into a variety of protocols such as Kinto, Plume, TrueFi, and others. In addition, the team at Adapt3r is highly active in creating value within certain sectors of DeFi and Web3 such as Lyra Finance (an Arbitrum-native derivatives exchange), Nexus Mutual, and Index Coop. We also run validators and miners across the EVM ecosystem. As avid tinkerers, we don’t just invest capital - we influence, strategize, and build with our partners to enable their decentralized networks to scale globally.
10. What are your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
tfBILL’s assets under management are ~$8,747,217.94 as of May 1, 2024. See table in Section 2 below showing our underlying holdings or our transparency dashboard. These updates, published on-chain can also be viewed on tfBILL’s TrueFi vault page (and also via IPFS).
11. How many of these assets held are present on Arbitrum One, if any?
None. Though we are excited to deploy on Arbitrum One if approved.
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.
Section 1: Product Description
Introduction to TrueFi and Asset Vaults
Asset Vaults are TrueFi vaults that facilitate off-chain credit, or “Real World Asset” (RWA), activity. Asset Vaults are made up of modular components, enabling PMs to configure vaults to their unique needs. Asset Vaults represent off-chain instruments by using on-chain attestations, or Asset Reports. By using this structure, Asset Vaults can facilitate diverse and complex RWA activities, such as deploying capital to off-chain uses: portfolio managers (PMs) can use Asset Vaults to create representations of off-chain debt instruments.
Introduction to tfBILL Fund
ADAPT I LP, also known as tfBILL, offers non-U.S. investors access to short-term U.S. Treasury Bill yields, prioritizing capital preservation, stable returns, and high liquidity. Incorporated in the British Virgin Islands, the fund is exclusively available to qualified non-U.S. investors.
Operational Strategy and Controls
tfBILL operates on a daily liquidity basis, aiming to process all redemption requests within one trading day. Approximately 99% of the fund’s assets are typically invested to minimize cash drag, leveraging regulated treasury management offerings through U.S. broker-dealers. Internal controls include consensus-based approval mechanisms and multi-layered security measures, both physical and digital, ensuring the safety of on-chain and off-chain assets.
Transparency and Legal Compliance
Transparency is integral to tfBILL’s operations, facilitated by integration with the TrueFi protocol, daily NAV reports from a third-party fund administrator, and scheduled audits in line with exempt reporting advisor requirements. Legal compliance is paramount, with Adapt3r Digital adhering to U.S. regulatory standards and the Fund complying with relevant regulations in the BVI jurisdiction.
Fund Structure and Investment Details
tfBILL tokens represent limited partner interests in the fund, which exclusively holds U.S. Treasury Bills. The tokens are minted upon depositing USDC into the fund’s smart contract vault, providing investors with direct access to treasury bill yields.
Investment Objectives and Strategy
tfBILL aims to provide low-risk yield by investing in Short-Term US Treasuries, ensuring capital preservation while generating stable returns. The fund focuses on USDC to USD conversion, asset purchase, token minting, yield reinvestment, and redemption processes.
Advantages of On-Chain T-Bill Exposure
Investors benefit from the deep liquidity and short-term maturity of U.S. Treasury Bills, with tfBILL offering 24/7 on-demand settlement, real-time transparency, self-custody, low default risk, and regulatory compliance. The fund is fully secured by U.S. Treasury bills in a bankruptcy-remote entity safeguarded by a regulated prime broker.
Investor Workflows and Flow of Funds
Subscription and redemption processes are managed through TrueFi smart contracts, with Archblock facilitating KYC/AML processes and providing a frontend interface for investor interaction. After an investor’s address is included in the fund’s allowlist, investor deposits USDC and mints tfBILL tokens. Funds are converted to USD and used to purchase Treasury Bills.
Protocol Controls, Security, and Transparency
TrueFi’s modular infrastructure ensures protocol controls, security, and transparency. Asset Vaults facilitate off-chain credit activities, while tfBILL token backing is consistently verified through on-chain and off-chain means, including regular audits and attestations.
Section 2: Description of Underlying Assets
Under normal market conditions, the Fund expects to invest at least 95% of its net assets in Government Securities with a duration of six months or less. In practice, underlying holdings are under 60 days in maturity and, on a weighted average basis, target approximately 30 days in duration. These underlying Government securities are Treasury Bills which target returns in line with the federal funds rate. Below you will find a detailed list of tfBILL’s holdings as of 05/1/2024:
| Description | CUSIP | Maturity | Market Value |
|---|---|---|---|
| United States Treasury Bill May 02, 2024 | 912797HH3 | 2024-05-02 | $2,838,000 |
| United States Treasury Bill May 09, 2024 | 912797HQ3 | 2024-05-09 | $1,020,954.79 |
| United States Treasury Bill May 16, 2024 | 912797FH5 | 2024-05-16 | $2,059,777.71 |
| United States Treasury Bill May 23, 2024 | 912797HR1 | 2024-05-23 | $1,521,315.05 |
| United States Treasury Bill May 30, 2024 | 912797HS9 | 2024-05-30 | $1,306,634.50 |
Attestation Reports
- IPFS CID: QmTNkXSUv8nHXFG92fciNr68zzF5dbfTNyMhzzE72ygrdg
- URL: https://ipfs.io/ipfs/QmTNkXSUv8nHXFG92fciNr68zzF5dbfTNyMhzzE72ygrdg
2. Do investors have any shareholder, investor, creditor, or similar rights?
The tfBILL token is an on-chain representation of investors’ LP shares in the Fund, and as such investors possess complete legal shareholder recourse rights to the assets held within the BVI professional fund.
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.
Legal Structure
Adapt3r Digital and Adapt3r Advisors, as U.S.-based General Partner and Investment Manager, respectively, comply with U.S. regulatory standards for compliance and asset management.
The Fund, which is incorporated in the British Virgin Islands, complies with the relevant regulations of its jurisdiction. Our collaboration with institutional-grade, regulated service providers across both territories strengthens our commitment to high standards of compliance, making the Fund a trusted choice for investors seeking to preserve capital and earn yield in a compliant manner.
Contractual Structure
Investing in tfBILL involves two essential legal documents:
Private Placement Memorandum (PPM):
- This document, accessible to the Screening Committee, aims to delineate the potential risks, investment objective, and structure of the Fund.
Limited Partnership Agreement:
- The Limited Partnership Agreement serves as a binding contract between the investor (i.e. Limited Partner), the General Partner, and the Fund. It defines how decisions are made, how profits and losses are distributed, how disputes are resolved, and the conditions under which the partnership can be dissolved. This has also been shared with the Screening Committee and is found in our data room.
Subscription Agreement:
- The Subscription Agreement serves as a document used by the General Partner to sell LP interests in the Fund. It contains key information and representations crucial for determining investor eligibility. Additionally, the terms of the Fund are outlined and consented to by the investor. This has also been shared with the Screening Committee and is found in our data room.
It’s important to note that the information provided within the Private Placement Memorandum and the Investment Agreement does not constitute a recommendation to invest. Investors are strongly advised to conduct their own examination and evaluation of the risks and merits associated with the investment before making any investment decisions. These documents have been shared with the Screening Committee over email and are included in the tfBILL data room.
4. Would Arbitrum’s assets be bankruptcy remote from your 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, the assets of Arbitrum are secured in a bankruptcy-remote BVI Professional Fund, ADAPT I LP, which operates independently from Adapt3r affiliates and is entirely owned by the Fund’s investors. Adapt3r Digital LLC and Adapt3r Advisors LLC, along with their officers and key contributors, solely function as service providers to the Fund, offering investment advisory, technology, and other services.
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.)?
The Fund’s underlying securities are held at TradeStation, a FINRA-regulated US broker-dealer, pursuant to a Custody Agreement. As a compliant institution, TradeStation does not encumber the Fund’s assets in any way: they are held in segregated accounts at all times covered by SIPC insurance. Even in the context of a TradeStation bankruptcy or force majeure, the Fund’s assets will remain protected and available for withdrawal. SIPC insurance carries a max cap of $500k, and cash balances are held in underlying bank accounts that are FDIC-insured.
6. Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
No, Adapt3r Digital and Adapt3r Advisors LLC currently only administer and manage one fund.
7. Provide a detailed cash flow diagram that shows the flow of funds from ARB/Fiat conversion, investment in the underlying asset, payment of expenses, sale of the underlying asset, and repayment (Fiat/ARB conversion), including the counterparties and legal jurisdictions involved.
Subscription to tfBILL is facilitated using USDC.
- Investors supply USDC into the Vault and mint tfBILL in exchange.
- Adapt3r Digital LLC is General Partner and responsible for administration. Adapt3r Advisors is Investment Advisor and responsible for the investment and liquidation decisioning.
- The Vault sends USDC to the Fund’s digital wallet.
- The proceeds are sent directly to the Fund’s fiat off-ramp. Adapt3r Digital LLC has engaged an on/off ramp providers (Coinbase Prime and Circle) to hold USDC, convert USDC to USD, and wire funds to an off-chain broker-dealer.
- Adapt3r Digital LLC has engaged an SEC- and FINRA-regulated broker-dealer, TradeStation, for prime brokerage services to custody and trade assets.
- Adapt3r Advisers LLC will instruct its broker-dealer, TradeStation, to execute trades, clear, and custody the pool’s assets.
- tfBILL holders hold sole legal recourse to all assets in the Fund as set forth in the Limited Partnership Agreement. The General Partner is only permitted to manage the Fund according to the Fund’s Offering Documents.
Redemptions follow an equal and opposite flow of funds, with the only additional step being that the investor must request a redemption via the front-end in order to trigger the process. Fund level liquidity and terms are described below.
8. Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
No corporate taxes are applicable in either the BVI or Cayman Islands. Investors are taxed in their own jurisdiction pursuant to applicable laws.
9. Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
Provided that redemption requests are received prior to 9:00 AM EST, redeeming investors will receive funds the same business day. If a redemption request is made after 9:00 AM EST, funds will be disbursed the following business day.
These liquidity timelines are a result of counterparty trading desk hours and wire cutoff times. We are currently formalizing agreements with institutional counterparties to enable instant redemption of tfBILL for USDC and fiat and expect this functionality to be live by the time Arbitrum makes its investment, if approved.
10. What amount of first-loss equity will the 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 Fund invests directly in a ladder of spot treasury bills, and as such the underlying holdings are highly liquid. The daily trading volume in US treasury bills eclipses $700 billion per day, making tfBILL especially suitable for large investors. In terms of settlement, the Fund operates on a T+1 basis for subscriptions. Redemptions occur depending on whether investors submit their request ahead of the cutoff time, in which case the Fund can redeem investors in the same trading day. Post the cutoff time and subject to the size of total redemption, the Fund may settle T+2 at the latest, with T+1 being the typical experience.
In the spirit of transparency and service to our clients, Adapt3r Digital LLC will also provide a white glove service for the Arbitrum DAO through this process. Our only constraints are those embedded in the traditional banking/fiat system.
12. If relying on the blockchain for any of the transactional flows, please describe any blockchain-derived risks and mitigations.
The primary risk vectors on-chain are:
- TrueFi Asset Vaults: despite being audited, there is always a risk endemic to smart contracts. The Asset Vaults are primarily used as an “escrow” for subscriptions and redemptions (Cicada Partners have written about the unique nature of onchain lending smart contract risk in this post). Notably, risk here is generally minimized as funds do not sit in TrueFi vaults for more than 24 hours.
- Multi-Sig: Adapt3r and its affiliates maintain a multi-sig that is permissioned to amend the vault’s whitelist, update oracles to reflect daily NAV provided by admin, and transfer funds to and from the contract for subscription or redemption purposes. This multi-sig is restricted to key personnel at Adapt3r.
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 the prime broker if any, custodian, reporting agent, and banks for derivatives or loans and provide primary contact details for the third-party counterparties
Investment Manager: Adapt3r Advisors LLC
General Partner: Adapt3r Digital LLC
Custodian: TradeStation Securities LLC
Auditor: Wolf & Company PC
NAV Calculation Agent: NAV Consulting, Inc.
Upon request, Adapt3r Digital LLC will share any individual contact details for our service providers and/or serve as the intermediary for communications between the DAO’s Screening Committee and the relevant parties.
15. Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
Our risk management, across both operations and investment activity, centers on the simplicity of our investment approach and product structuring. This simplicity is by design – we believe that complexity breeds fragility.
tfBILL was built in response to compliance and complexity concerns we continually heard from DAOs and on-chain investors about existing treasury bill offerings. Specifically, many DeFi entities and users expressed difficulty evaluating existing options due to contrived and opaque legal structures with uncertain investor recourse, hidden layers of fees, and aggressive operation in regulatory grey areas.
Since the beginning, our primary goal has been to build an on-chain treasury instrument that is simple, transparent, and secure for all users.
Operational Risk Management
The Fund’s operations are safeguarded by robust internal controls, including consensus-based approval mechanisms and role-based governance protocols.
For example, by limiting disbursement of funds from the contract to onlyAllowedBorrowers that are assigned the BORROWER_ROLE by TrueFi governance, tfBILL can ensure that USDC can only be disbursed to approved addresses at Coinbase Prime.
These measures are bolstered by multi-layered physical and digital security protections. On-chain assets are safeguarded by multi-sig operations and leading custodial providers. Off-chain assets are held in custody with a regulated institutional custodian and a FINRA-regulated broker-dealer.
Our operational controls are supported by technology solutions including real-time monitoring and alerts, ensuring that any unauthorized access or deviations from established procedures are quickly identified and addressed. Additionally, we engage a reputable fund administrator to oversee daily Net Asset Value calculations as well as an AML Reportig Officer to enforce meticulous KYC, KYB, and AML protocols, further reinforcing our commitment to regulatory compliance and operational integrity.
Investment Risk Management
The cornerstone of our Investment Risk Management centers ADAPT I LP focuses on maintaining a conservative and strategic approach to portfolio management, investing only in short-term U.S. Treasury bills. Our investment strategy employs a ladder approach by diversifying across different maturities to effectively manage duration and liquidity risks.
This strategy is supplemented by active internal reviews and monitoring, ensuring alignment with our risk appetite and investment goals. We also conduct extensive research and leverage independent expertise to inform our investment decisions, ensuring that each investment is well-positioned to meet our stringent criteria for risk and return.
By maintaining rigorous operational controls and a prudent investment strategy, we ensure the safety and performance of our fund. Our full risk management policies are available upon request.
Performance Reporting
1. What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
The Fund’s investment objective targets the effective Federal Funds Rate, consistent with our underlying holdings of short term US treasury securities.
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.
Investors can view their balance and the Fund’s net asset value daily on-chain via TrueFi’s price oracle for tfBILL. In addition, investors receive monthly statements via their investor portal.
Key performance metrics and fund statistics are publicly available on our Transparency Dashboard, which the Arbitrum community can easily access: Transparency Dashboard
3. Who provides the performance reports with respect to the underlying assets?
Investors can view the underlying U.S. Treasury Bills held in the off-chain brokerage accounts via Archblock’s investor reporting tool. Annual fund audits of ADAPT I LP will be performed by Wolf & Company, P.C., and daily net asset values are calculated by a third-party fund administrator, NAV Consulting, which are updated directly on the Archblock website. Additionally, we plan to integrate with Chainlink’s proof-of-reserves technology, providing automated audits of the underlying treasury assets.
Adapt3r also maintains a public Transparency Dashboard in addition to a daily on-chain update reflecting the Fund’s Net Asset Value and underlying holdings.
4. Describe any formal audit process and timing of such audits.
Wolf & Company PC performs an annual financial audit for the Fund.
Pricing
1. Provide a copy of your standard contract, or one similar to what is being proposed here.
Our Limited Partnership Agreement and Private Placement Memorandum has been shared with the Screening Committee over email and are included in the tfBILL data room.
2. Fee summary
Adapt3r Advisors LLC charges one simple 0.30% management fee.
Adapt3r Digital LLC has agreed to waive or pay for certain expenses on behalf of the Fund. Adapt3r Digital LLC (not shareholders) shall continue to be responsible for paying new and/or ongoing expenses related to:
- the offering and organization of the Trust and the Series,
- monthly expenses related to the fund’s administration,
- investor onboarding
The Fund does not charge early exit fees when clients choose to redeem, regardless of how long they have been invested in the fund. In the future, the Fund will offer investors the option to withdraw from the fund on a T+0 timeline, which may be enabled by the introduction of a new fee.
Note: These fees and expenses are outlined explicitly in the Fund’s Private Placement Memorandum and Investor Agreement upon subscription.
3. Describe the frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
Management fees are paid on each interaction with the vault, including subscriptions (deposits), redemptions (withdrawals), disbursements made by the Portfolio Manager (“PM”), or updates to the vault value (“NAV updates”).
Whenever an interaction happens, the following sequence is executed by the vault smart contract.
Service providers are paid on a monthly basis and are covered entirely out of the Fund’s management fee. Investors do not bear any operational expenses of the Fund.
Smart Contract / Architecture
1. How many audits have you had and names of auditors?
TrueFi’s Asset Vaults are audited by Chainsecurity and the Audit Report can be accessed here. You can find more information on TrueFi’s Asset Vaults in the docs here and github here.
2. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
To be eligible for investment in tfBILL shares, you must qualify as:
- a non-U.S. investor
- a professional investor pursuant to BVI Regulations
You must qualify for both designations to be eligible for investment. Due to this, investor information is maintained within a database managed by our fund administrator.
3. Is the product present in several chains? Are there any cross-chain interactions?
tfBILL is (at this time) only available on Ethereum as an ERC-20 token.
4. Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
tfBILL tokens are integrated into the TrueFi ecosystem, which also features a private credit marketplace and (soon) a tfBILL-backed stablecoin. Additionally, tfBILL is integrated into the Kinto, and Plume ecosystems.
That said, we are proactively pursuing integration into additional various use cases, subject to compliance reviews.
5. How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
Trust-minimized: Full transparency into flow of funds and real time on-chain monitoring. On-chain assets are segregated in cold storage and held by a Qualified Custodian. Off-chain assets are segregated and custodied by a FINRA-regulated broker-dealer. Investors can monitor the manager’s portfolio, yield generation, fees and expenses, and ongoing maturity profile in real-time. Streamlined investor reporting statements are provided by Archblock. Further, investors have real-time visibility of the off-chain U.S. Treasury Bills held by the manager as well as deposits and withdrawals to the Fund. The primary activity that requires trust from our investors is within the subscription/redemption process, whereby Adapt3r withdraws USDC to Coinbase Prime. Adapt3r controls the TrueFi Asset Vault using multi-sig technology, and access is limited to key management personnel. Every other aspect of the flow of funds is trustless and/or highly regulated.
Audits & Attestations: Independent third-party fund administrator NAV Consulting releases daily NAV reports (which are available to investors on Archblock’s frontend), detailing the Net Asset Value of the backing tfBILL’s underlying holdings. ADAPT I LP is subject to annual audits, conducted by Wolf & Company, a recognized fund auditor with deep experience in blockchain fund audit and accounting services. This ensures that ADAPT I LP maintains the highest accounting standards and third party oversight.
Administrator: NAV Fund Administration Group serves as the Administrator for the Fund. The Administrator provides certain accounting, operations and other administrative support for the Fund as preparing quarterly reports, calculating the Fund’s Net Asset Value, providing the registrar and transfer agency services in connection with the issuance and transfer of Interests, performing the required acts relating to the redemption and/or subscription for the Interests and performing certain other administrative and clerical services in connection with the administration of the Fund as agreed among the Fund and the Administrator.
Custodian: The Fund has appointed TradeStation Securities, Inc. as its custodian to custody the U.S. Treasury Bills and may have a separate custodian for the custody of USDC and other consideration paid by Limited Partners. Such custodians have developed security systems to maintain confidential access to private keys that have been generated and which control movement of the Tokens, as applicable. The Investment Manager may not be able to obtain control of the private keys generated by the exchanges utilized by the Fund, because each exchange may use different methodologies and security systems. The Investment Manager seeks to employ a comprehensive due diligence process to select custodians that it determines have developed sophisticated security systems and will continue to reevaluate the due diligence process and security systems of the various custodians.
6. Is there any custom logic required for your RWA token? If so please give any details.
None - tfBILL is ERC-20 compliant.
Supplementary
1. Please attach any further information or documents you feel would help the screening committee or ARB token-holders make an informed decision.
N/A.