Name : Kallol Borah
Title : Executive Director
Company / Issuer : Verified SV Sarl
Address (Headquarters) : 3 rue Gabriel Lippman, L-5365 Munsbach
Country : Luxembourg
Email : kallol@verified.network
Telegram : @kallolb
Website : www.verified.network
Executive Summary
Verified SV Sarl is a Luxembourg based based securitization company that operates under the Securitization law 2004. It is organized as a limited liability company and has multiple compartments, each ring fenced with respect to its assets and liabilities from other compartments. The company itself is bankruptcy remote and is 100% owned by a public charitable trust. The compartments issue asset backed securities under the MIFiD regulatory regime in the EU. Securities issued can be registered and settled using traditional clearing systems, but also can be issued as tokens.
Verified SV Sarl has a compartment called ‘Nucleus 5’ that is issuing tokens representing a note backed by a pool of loans underwritten by UK based small business lender named Nucleus Commercial Finance (NCF). NCF has set up a UK based Special Purpose Vehicle (SPV) called Priority Finance Limited (PFL). Subscription capital in the Nucleus 5 compartment are used to buy loans from NCF that are posted on the books of PFL and serviced by NCF itself. All assets including loans in PFL exclusively are owned by the Nucleus 5 compartment, and there are no other creditors in PFL. PFL is administered by CSC, and Nucleus 5 is administered by Apex Group, and both CSC and Apex Group are large, global administrators.
Key Information
Expected Yield
SONIA + 5.5%
SONIA is the UK base rate which is currently 4.5% as of March 19, 2025. Therefore, the expected yield is 10% annually.
Expected Maturity
The tokenized note issued by Nucleus 5 has a maturity of 48 months. However, the notes can be redeemed early from Year 1 itself.
The loans underlying the note have maturities between 6 months and 36 months.
Underlying asset
Underlying assets are loans to UK based small and medium enterprises (SMEs).
Minimum/Maximum transaction size
EUR 100,000 is the minimum transaction size. There is no maximum limit.
Current AUM for product
EUR 9 million
Current AUM for issuer
GBP 300 million
Volume of transactions LTM
NA
Source of first-loss capital
Nucleus Commercial Finance is providing a first loss guarantee of upto 3% of outstanding loans in Priority Finance Limited.
Basics and background
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How will this investment improve Arbitrum’s RWA ecosystem?
This investment will expand the Arbitrum RWA ecosystem to cover the private credit asset class. So far, money market funds have got the most attention in the RWA ecosystem. However, private credit with granular underlying assets mitigate risks and drive liquidity with respect to the capability of the asset manager or non-bank lender to redeem such asset backed securities. Global private credit is a USD 1.5 trillion asset class and the SME financing gap itself is USD 5 trillion which gives private credit a large headroom for growth. Private credit for SMEs also has significant development impact. -
Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
Chirag Shah, CEO, Board Member
Prior to establishing Nucleus, he was a Portfolio Manager at Acheron Capital, a London-based asset manager focussing on acquisitions in the distressed insurance space.
Previously, he was a member of the Investment Committee at a London-based investment management group with $2bn AUM, where he structured and managed $0.6bn of ABL assets. He has also held positions at Wachovia Securities in London, and Merrill Lynch in New York.
Chirag holds a Masters in Computational Finance from Carnegie Mellon University, Pittsburgh, and a Bachelor of Engineering in Information Technology from the University of Mumbai.
Mark Goldman, Managing Director
Mark joined Nucleus in 2012 after a career spanning 30 years in global fixed income markets. He is involved in the daily running of the Nucleus business along with Chirag, with a focus on Marketing and Investor Relations.
In 2005, Mark joined Mitsubishi UFJ Securities International in London as Managing Director, Head of Fixed Income. From 2000-2005 Mark was Head of European Sales for BNP Paribas and on the European Executive Committee. Prior to BNP, Mark held Fixed Income positions at Nomura International and Merrill Lynch in both Europe and the US.
Simon Wilmett, CFO and MLRO
Simon joined Nucleus in 2015. Prior to Nucleus, he had worked in corporate restructuring for 13 years, including 10 at Deloitte in London.
Simon has specialised in formal business reviews, accelerated M&A processes, capital raising, debt advisory as well as working on a number of high-profile corporate restructuring and insolvency appointments. In addition to sitting on the board and overseeing the company’s finance function, Simon is a member of the credit committee and undertakes due diligence on larger complex deals, especially where there is an element of distress or a restructuring angle.
Simon is a dual qualified Certified Chartered Accountant (ACCA) and Accounting Technician (AAT).
- Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
Verified SV Sarl has tokenized fund shares of Idol Bay III, a fintech investment feeder fund that is managed by Fasanara Capital, a global fintech lender with USD 4.5 billion in Assets under Management.
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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.
None -
Describe any conflicts of interest for your entity and key personnel.
None -
Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
Nucleus Commercial Finance Limited is providing a first loss guarantee of upto 3% of outstanding loans to ensure that the loan portfolio that backs the issued tokenized note is current and performing. -
Historical tracking error in your proposed product, or similar to that being proposed Product 2024 2023 2022 2021
Not applicable -
Brief reason for above tracking error
Not applicable -
Please describe any experience your firm has in working with decentralized organizational structures
Verified SV Sarl is a securitization company and by law is prohibited from engaging in any operational business. However, Verified AG, its Swiss affiliate business and group company has worked with the Balancer DAO and Compound DAO, two leading decentralized organizations to develop the technology infrastructure to issue and trade tokenized notes. -
What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
The Nucleus 5 compartment can issue upto USD 60 million in tokenized notes backed by loans underwritten by Nucleus Commercial Finance and serviced in Priority Finance Limited. Other compartments in Verified SV Sarl have issued USD 180 million in tokenized notes. -
How many of these assets held are present on Arbitrum One, if any?
None, as of today. We are in the process of deploying contracts on Arbitrum now.
Plan design
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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.
The product is an asset backed note issued by Verified SV Sarl Nucleus 5 compartment. The assets are SME loans underwritten by a UK based SME lender – Nucleus Commercial Finance Limited, that has underwritten more than USD 3 billion in SME loans since its establishment in 2012.
The underlying assets comprise of granular SME loans with a maximum 20% industry concentration and 20% geographic concentration and average principal outstanding balance for borrowers at USD 250,000.
The underwriting policy is being emailed to you separately. -
Do investors have any shareholder, investor, creditor or similar rights?
The rights of Noteholders issued in respect of a Compartment and the rights of creditors are, in principle, limited to the assets of that Compartment, where these rights relate to that Compartment or have arisen as a result of the constitution, the operation or the liquidation of the relevant Compartment are limited to the assets of that Compartment. The assets of a Compartment are, in principle, exclusively available to satisfy the rights of Noteholders issued in relation to that Compartment and the rights of creditors whose claims have arisen as a result of the constitution, the operation or the liquidation of that Compartment. Fees, expenses and other liabilities incurred on behalf of the Issuer but which do not relate specifically to any Compartment may be payable out of the assets allocated to all Compartments. The Manager of the compartment shall ensure, to the extent possible (although there is no guarantee that the Manager will be able to achieve this), that creditors of such liabilities expressly waive recourse to the assets of any Compartment.
The Manager shall establish and maintain separate accounting records for the Compartment of the Issuer in order to ascertain the rights of Noteholders in respect of the Compartment. Such accounting records will be conclusive evidence of such rights in the absence of manifest error. The assets of the Compartment may include the proceeds of the issue of the Notes. The fees, costs and expenses in relation to the Notes are allocated to the Compartment relating to the relevant Notes in accordance with the relevant Terms and Conditions. Holders of the securities in the Compartment will have recourse only to the assets relating to the Compartment. -
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.
In the above structure, Nucleus Commercial Holdings and Nucleus Cash Flow Finance 5 (NCCF5) are UK companies. NCCF5 is the originator of the underlying assets (loans) that are housed in the Nucleus – Verified UK SPV (Priority Finance Limited) which is also in the UK. SME borrowers are in the UK. The servicers of the underlying assets are Nucleus Services Limited (a UK company) and Pulse Limited (an Indian company). The lender on record to Priority Finance Limited is Verified SV Sarl Nucleus 5 company which is based in Luxembourg. The servicer for KYC compliance and AMLA monitoring is VSV Securities (IFSC) Private Limited. The trustee / agent is CSC which is an English and Irish company. The VASP is GCEX AS which is a Danish company.
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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, Arbitrum’s assets will be bankruptcy remote from other compartments in Verified SV Sarl and from Verified SV Sarl itself. The Issuer Verified SV Sarl operates under the Securitization law of Luxembourg that makes each compartment bankruptcy remote by law.
The Company is structured to be an insolvency-remote vehicle. The Company will seek to contract only with parties who agree not to make any application for the commencement of winding-up, liquidation or bankruptcy or similar proceedings against the Company. Legal proceedings initiated against the Company in breach of these provisions shall, in principle, be declared inadmissible by a Luxembourg court. Notwithstanding the foregoing, if the Company fails for any reason to meet its obligations or liabilities (that is, if the Company is unable to pay its debts and may obtain no further credit), a creditor who has not (and cannot be deemed to have) accepted non-petition and limited recourse provisions in respect of the Company may be entitled to make an application for the commencement of insolvency proceedings against the Company. In that case, such creditor should however not have recourse to the Assets of any Compartment but would have to exercise his rights over the general Assets of the Company unless his rights arise in connection with the “creation, operation or liquidation” of a Compartment, in which case the creditor would have recourse to the Assets allocated to that Compartment but he would not have recourse to the Assets of any other Compartment. -
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.)?
See previous answer. Under securitization law of Luxembourg, each compartment’s assets are protected. For notes issued by the Nucleus 5 compartment, Arbitrum’s claims are pari passu that of other capital contributors in the compartment. -
Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
No, the Issuer (Nucleus 5 compartment in Verified SV Sarl) does not issue more than asset. -
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.
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Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
Verified SV Sarl is a tax transparent entity and will pass through any applicable taxes to the jurisdiction where the Noteholders (investors) are resident.
Payments in respect of the Notes shall only be made after the deduction and withholding of current or future taxes, levies or governmental charges, regardless of their nature, which are imposed, levied or collected (collectively, “taxes”) under any applicable system of law or in any country which claims fiscal jurisdiction by, or for the account of, any political sub-division thereof or government agency therein authorised to levy taxes, to the extent that such deduction or withholding is required by law. The Issuer shall account for the deducted or withheld taxes with the competent government agencies and shall, immediately notify the Noteholders and provide them with written evidence thereof. -
Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
Notes shall be redeemed at the Outstanding Principal Amount plus accrued Interest (the “Final Redemption Amount”). and subject to the limitations provided below.
Final Redemption on Maturity Date
Unless previously redeemed, extended and cancelled as provided below, each Note will be redeemed on the Maturity Date or the Extended Maturity Date, as the case may be, at the Final Redemption Amount calculated by the Calculation Agent. The Final Redemption Amount shall be paid in accordance with the Priority of Payments.
Early Redemption by Noteholders
(i) Early Redemption Windows
Noteholders shall have the option to request early redemption of their Tokens, partially or in whole, at the following intervals, calculated from the Issue Date of the Notes:
• After 12 months;
• After 24 months; and
• After 36 months (together the “Early Redemption Windows”).
Early redemption requests must be made by delivering a written noteholder early redemption notice (“Noteholder Early Redemption Notice”) to the Issuer through the Platform, specifying the principal amount to be redeemed and selling the Tokens back to the Issuer for the amount to be redeemed.
(ii) Notice Period
The Noteholder Early Redemption Notice must be delivered no less than 30 days prior to the requested redemption date.
The Issuer shall acknowledge receipt of the Early Redemption Notice within 5 Business Days of receipt.
(iii) Conditions for Redemption
Early redemption requests shall be honored provided the Issuer has sufficient funds to satisfy such requests.
Redemption shall occur within 15 Business Days of the requested redemption date, subject to availability of funds.
(iv) Insufficient Funds
(a) In the event the Issuer does not have sufficient funds to honor an early redemption request, the Issuer shall:
i. Notify the relevant Noteholder(s) within 5 Business Days of the insufficiency of funds;
ii. Prioritize the redemption request in order of receipt and fulfil the redemption as soon as sufficient funds become available; and
iii. Provide periodic updates to the Noteholder(s) on the status of the redemption.
(v) Execution of Redemption
Upon successful redemption, the Issuer shall:
i. Redeem the Notes at their principal amount, together with any accrued and unpaid interest up to the redemption date; and
ii. Confirm completion of the redemption by electronic notification to the Noteholder.
(vi) No Obligation Beyond Funds
The Issuer shall not be obligated to liquidate assets, incur debt, or take extraordinary measures to fulfil redemption requests if sufficient funds are not available.
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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?
The Sponsor Nucleus Commercial Finance will provide upto 3% of outstanding loans in Priority Finance as first loss guarantee. The first loss equity is denominated in Pounds Sterling and the source of capital is Nucleus Commercial Holdings and its subsidiaries such as Nucleus Commercial Finance 5.
In addition to the first loss equity, a reserve of 20% of the those Notes or any such amount required determined on a daily basis by the Issuer which will be kept by the Issuer and used to redeem the Notes for ARB Tokens, if required. -
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 SME business loans. They can not be liquidated on demand and loan tenures range from 6 to 36 months. Repayment of ARB is linked to the coming of maturity of the underlying assets. They can also be sold on a true sale basis to generate liquidity for repayment of ARB. -
If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
None -
Does the product rely on any derivative product (swaps,OTC agreements?
No -
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
THE ISSUER Verified SV S.à r.l.,
acting in respect and on behalf of its Compartment Nucleus 5, 3 rue Gabriel Lippman, L-5365 Munsbach, Grand Duchy of Luxembourg
email to: compliance@verified.network
cc: VerifiedSVSarl@apexgroup.com
SECURITY TRUSTEE CSC Capital Markets
TOKENIZER Verified AG
Dammstrasse 16,6300 Zug, Switzerland
CALCULATION AGENT VSV Securities (IFSC) Private Limited
T1-T4, Ground F, Road 1A, Block 11, Zone 1, SEZ-PA Gift City, Gandhinagar Gandhi Nagar GJ 382355, Gujarat, India
support@verified.network
CORPORATE SERVICE PROVIDER Apex Fund Services SA
3, rue Gabriel Lippmann, L - 5365 Munsbach, Grand Duchy of Luxembourg
LEGAL CMS Luxembourg
AUDITOR PKF Audit and Conseil Sarl 76, avenue de la Liberte, L-1930 Luxembourg
VASP GCEX
Amager Strandvej 390, 2770 Kastrup, Denmark
- Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
A copy of the risk management policy is being emailed to you.
Performance reporting
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What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
The performance metrics are as follows. The performance of the Nucleus 5 note is not substantially different from the underlying loans backing the note. -
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 being emailed to you. -
Who provides the performance reports in respect of the underlying assets?
The administrator, CSC Capital Markets (UK) Limited provides the performance reports of the underlying assets. -
Describe any formal audit process and timing of such audits.
Audits are mandatory and are annual.
Pricing
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Provide a copy of your standard contract, or one similar to what is being proposed here.
A copy of the subscription agreement is being emailed to you. -
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)
The fee payable is 0.5% annually on the assets under management of the Nucleus 5 compartment. -
Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
The proceeds from the issuance of the Notes shall, upon receipt, be credited to the Issuer Account and shall be applied as follows:
(i) first, to create the Redemption Reserve;
(ii) second, towards payment of any fees to the Agents; and
(iii) third, to be invested into the Underlying Assets.
Smart Contract/Architecture
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How many audits have you had and name of auditors? Please provide a copy of reports.
The security token contracts are based on the CMTA standard (https://cmta.ch/) which was audited by ABDKConsulting and the vault and liquidity pool contracts are based on the Balancer V2 protocol which were audited by Certora, Trail of Bits, ABDK Consulting and Open Zeppelin. -
Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
The project is on a public blockchain. However, wallets transacting the tokenized notes have to be whitelisted by compliance managers after they have approved KYC data submitted by such users. -
Is the product present on several chains? Are there any cross chain interactions?
Yes, the product is available on Base and would be available on the Ethereum mainnet as well. There are no cross chain interactions. -
Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
The RWA tokens are not used in any other protocols. -
How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
Admins in the system primarily comprise of 3 counterparties – the issuer which is Verified SV Sarl’s Nucleus 5 compartment, the compliance managers, and the Virtual Assets Service Provider that converts digital assets into fiat and vice versa. These are 3 independent parties. Verified SV Sarl’s Nucleus 5 compartment is managed by a regulation compliant administrator. The compliance manager is a company called VSV Securities (ISFC) Private Limited which is a licensed company operating out of GIFT City in India. The VASP is a EU / Danish regulator compliant and licensed company. The system has whitelisted these three counterparties and restricted their activities specifically to their functions. -
Is there any custom logic required for your RWA token? If so please give any details.
None. It is an ERC 20 token based on the CMTA standard.
Supplementary
- Please attach any further information or documents you feel would help the screening committee or ARB tokenholders make an informed decision. If you prefer this not to be made public, it can be emailed to rwa@dao.arbitrum.foundation. Please mention in your application that documents have been emailed for committee review.
The full offering memorandum and subscription agreement of the Nucleus notes is here - DocSend