Update (April 6, 10:35 UTC): This article has been updated with new information from Factom Inc. CoinDesk has also clarified the distinction between the firm and the protocol.
Factom Inc. has entered financial difficulties after an appeal for additional funding fell on deaf ears, according to its main investor.
Built on Factom Protocol, which was one of the first blockchain projects to ever host a token sale in 2015, the company said March 31 it had begun the process of dissolution, according to a London Stock Exchange announcement from largest backer FastForward on Thursday.
“[FastForward] has been notified by the directors of Factom that in a board meeting on 31 March 2020 they concluded that, in the absence of further funding, they now needed to begin the process of assignment of assets for the benefit of creditors,” reads the statement.
Although Factom Inc.’s Twitter page had fallen silent in the middle of January, alarm bells started ringing in March after the company told investors it would enter liquidation by the end of the month unless it received additional funding.
FastForward, which had the largest stake in Factom Inc., said it was prepared to renegotiate its $6 million simple agreement for future equity (SAFE) to try and attract outside investment. Although it was willing to participate in another investment round, FastForward told Factom directors that it was not prepared to lead. Previously announced talks with investors were also unsuccessful.
Following a board meeting on March 31, Factom finally told investors it would consider beginning the process of liquidation. As its biggest investor, FastForward said in their announcement that they will now become receiver and will take the lion’s share of the company’s assets and intellectual property. A timetable for when Factom will eventually be wound up has not been disclosed.
Factom Inc. COO Jay Smith denied FastForward’s claims that the company had entered receivership. Saying the press release contained many “misstatements of fact,” he said the board of directors were, at the request of FastForward, putting “a motion to take such an action before shareholders,” who would have to pre-approve a dissolution event.
“However, we do not expect the motion to be approved,” he added.
Based in Austin, Texas, the Factom Protocol started in 2014 as a trustless data-provenance layer on the Bitcoin blockchain. Just last year, data security firm TFA Labs received a grant from the U.S. Department of Energy to use Factom’s open-sourced blockchain to secure the country’s power grid.
Factom Inc., which launched in 2015, announced high-profile partnerships and grants with government agencies, including the Department of Homeland Security, to secure or verify data.
The closure of Factom Inc. will not have any impact on the running of the Factom Protocol, said Factom Inc. chairman David Johnston.
FastForward, which is listed on the London Stock Exchange and has invested in a diverse range of tech startups, entered into a $6 million SAFE with Factom Inc. in 2018. In its near-six-year history, Factom raised more than $18 million from investors.
In an announcement, FastForward director Ed McDermott admitted the company was not altogether certain how Factom Inc. ended in such dire financial straits.
“We are extremely disappointed with this news from Factom,” he said in a statement. “As we go through the Receivership process and understand more of the events that led to this position our position as investors in Factom is expressly reserved.”
CoinDesk approached FastForward for additional comment, but did not hear back by press time.