1754 Factory: Proposed Legal Review and Report to Centrifuge Community

Centrifuge Governance Governance discussion
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Introduction to North Lakes Legal PLLC

North Lakes Legal PLLC (“NLL”) is a Washington, D.C. based legal practice. @christiancdpetersen is the founder and principal of NLL.

While at MakerDAO, @christiancdpetersen structured, negotiated, and implemented the initial high-profile real-world asset (“RWA”) financings in the DeFi space:

  • SG Forge – DAI 30 million, tokenized French covered bonds
  • Huntingdon Valley Bank – DAI 100 million vault to acquire RWA loan participations
  • BlockTower Credit – DAI 150 million vault utilizing Tinlake for various RWAs
  • Monetalis Clydesdale – DAI 250 million to acquire U.S. treasury ETFs

@christiancdpetersen worked with Centrifuge’s General Counsel to structure and prepare an indenture trust agreement to support Maker financing of assets on the Tinlake protocol.

Also, @christiancdpetersen co-authored and publicly discussed the comprehensive guidelines for potential MIP6 applicants. Here, Here, and Here

He also evaluated numerous financing proposals, including a European “buy-now, pay-later” offering, Bitcoin mining in South America, real estate financing in the United States and Canada, power projects in the Middle East and Indian sub-continent, and several D3M proposals.

Prior to forming NLL in 2020, @christiancdpetersen led a 5-person legal team (in Singapore, Houston and Maputo) responsible for all legal work for the marketing, shipping, and $16 billion project financing of the Mozambique LNG project, a $26 billion project in northern Mozambique.

@christiancdpetersen also worked in private law firms for 15 years in Washington, DC, Hong Kong and Tokyo, where his practice focused on project finance, structured and acquisition finance, and general commercial transactions, including restructurings.

Proposal

Transparency, open-communication, and independent, third-party verification are critical features to ensure the ultimate success and longevity of the DeFi experiment.

Centrifuge and the Tinlake Protocol are critical components of this DeFi experiment.

Given the recent discussions in the Centrifuge Forum on 1754 Factory, NLL proposes to undertake a comprehensive review of the current 1754 Factory facility, the underlying performance of its assets, the nature and scope of the communications with DROP and TIN token holders, and make a recommendation to the Centrifuge community on next steps and improvements.

NLL’s legal services will encompass the following:

  • NLL will conduct a review of the 1754 Factory loan portfolio to ensure its compliance with the covenants, agreements and terms of the Centrifuge agreements.

  • NLL will prepare a report to be published on the Centrifuge Forum with its findings and recommendations.

  • NLL will hold a public office-hours to discuss its findings and recommendations.

Fee Structure

NLL proposes a flat fee of DAI 25,000 (or USDC) to undertake the proposed scope of work. NLL anticipates that, assuming reasonable cooperation, the scope of work will be completed within 6 weeks of the initial engagement. To ensure that the Centrifuge community has visibility on a going-forward basis, NLL will publish a weekly update on the Centrifuge Forum.

@christiancdpetersen welcomes the Centrifuge community’s input to this proposal.

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Hi @christiancdpetersen. Thanks for bringing this up. Just one quick note: I moved it into the subcategory here because it concerns the Centrifuge governance.

I invite every investor from the 1754-factory thread to comment on this post

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Thanks for this, @christiancdpetersen. I think this could definitely be valuable.

Agreed with @Tjure07 it would be great to solicit feedback from senior tranche lenders in the pool to see if there is interest.

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@christiancdpetersen - We love to see this type of entrepreneurial hustle on the forums!!

I suggest you hold a “Know Your MIP” type of open forum for the community to learn more about the proposal and ask questions.

@Tjure07 @Rhano @ImdioR @Kate_Bee - can you please advise on an open forum concept for this and if it would make sense here.

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I am all for it. That is an excellent idea.

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Thanks Jake. That’s a great idea as well to initiate a similar setting but again this is up to the community. First everyone who is in favor of this proposal should show enough interest in the comments and then everyone should express his/her interest for an “open forum”.

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Thank you @christiancdpetersen for bringing this up, I think this is a good initiative for the 1754 and future pool, would be great to get more comments and also the snapshot voting later on!

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@christiancdpetersen I think this is an interesting proposal and first of its kind. I would like to hear what the rest of the community - especially the senior tranche investors in the pool - think of this.

What do you think about presenting this proposal in the upcoming governance call (Wednesday 19th April 18.00 CET) to get more feedback?

This could be the “Know your MIP” session where people can ask questions and get clarification. (cc. @ItsJake)

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I am pleased to present the proposal on 19th April at 18.00 CET. Thank you for the opportunity to engage with the Centrifuge community.

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Sounds a great proposal. Thanks! I think it should be obvious but it would be stupid not to ask that there’s no conflict of interest between 1754 Factory and NLL, not on the corporate level nor on the individual level of all people involved.

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There is no conflict of interest.

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Great initiative. Look forward to the report. 1754 factory pools were one of the earliest and largest pools that were onboarded by Centrifuge. How we will handle this will be very important for the current & future trust in the protocol.

Davoa and Fabien Dureuil @Fab @Fabien seem to have gone quiet after closing this thread. No contact by mail either.

I checked out the rest of the team that was presented as the Davoa Capital key principal team in their shared Factory 1754 Bling Series 1 PPM document. To see if I might be able to reach other people on the Davoa side.

Faisal Bhatti
https://www.linkedin.com/in/faisalbhatti1990/

and

Mehdi Legroune
https://www.linkedin.com/in/mehdi-legroune-40b22032/

They don’t seem to work for Davoa anymore. In fact, according to Linkedin, Faisal worked there for 3 months, and Mehdi doesn’t even mention it as an experience, so that would indicate a short stay as well. That begs the question, who was vetting the originator and the loan book on behalf of Davoa? I can’t find any other names in relation to Davoa, except for Fabien.

Is anyone from the Centrifuge team still in contact with Fabien? Is he cooperating with this review?

Other important questions:

  • What due diligence does the Centrifuge team do on the issuers?

  • What protective measures does the protocol take to avoid rogue or incompetent issuers? Contracts? KYC/AML? Collateral?
    Not implying Fabien or Davoa is rogue or incompetent - raising the question more generally around the safety mechanisms around issuer selection and controls. Always assumed the main risks would lie with the originators and the smart contracts / protocol. If those two factors were relatively good, the senior tranche would mitigate most of the remaining risk. So I am curious about what damage an issuer could do in a bad-case scenario and how (if) this is mitigated.

  • Why is the series 1 thread closed?

  • Should we be worried about Branch Series 3 as well?

  • Does the issue here lie with the issuer (Davoa Capital) or the originator(s)? (Sherwood/Bling and Branch) Or both?

  • Has the Centrifuge team, community or @christiancdpetersen been in contact with Sherwood and Branch themselves since the early distress signals? Are they still in contact?

  • Can Sherwood (Bling) and Branch respond to the Centrifuge community / their creditors as well?

It would be great if some of these questions could be answered here on in the report.

How is the legal review progressing? We are nearing the end of the 6 weeks period. Is it still expected to be completed within that timeframe? @christiancdpetersen

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Hi @Str8Fish!

Thanks for your questions and remarks. I can answer the quoted one: the forum post was closed because it was meant as a pool summary from the beginning to introduce the pool and the issuer. For pool updates and other inquiries a new post should be created. If anyone has questions concerning the pool closing, please contact the issuer via email because this is the issuer’s preferred way of communication

Please contact the issuer concerning this pool if you have any questions or worries

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I thought we have the auditor who’s going to give answers to all these questions?

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Did the DAO approve funding for the proposed Legal Review and Report?

As a senior tranche investor (Branch Series 3), I certainly hope so. (No mention in this thread on what happened to the proposal.)

Radio Silence

Regarding contact by email with the issuer, this appears to be useless as the issuer (Fabien) does not respond. His failure to reply to emails is deeply troubling.

Even More Troubling

Centrifuge advising investors to “contact the issuer concerning this pool if you have any worries,” is even more troubling as Centrifuge likely knows that the issuer is ignoring inquiries. (Forgive the paranoia, but it’s as if legal advice was dispensed to avoid creating an impression of any responsibility for this issuer’s pools.)

In addition to the imminent (?) report, Centrifuge should have the issuer provide regular updates on the status of the beleaguered asset pools. Full transparency is in order here.

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Hi @BLahar. Not yet, the proposal is still in the discussion phase. It remains open for pros and cons to give the community the chance to comment on it.

I am sorry to hear that but this is the best way to reach out to the issuer and he explicitly asked his investor to contact him via email: investors@1754.finance
You can try to write @Fabien a message in the forum as well

Yes, I agree. Full transparency is key and we always are glad to see regular updates from different pools.

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This response falls short.

Centrifuge should make regular reports by 1754 Factory a requirement. Where, as here, there are concerns about pool liquidity, reporting is a must. Leaving it entirely up to an issuer - as you suggest - allows the issuer to do nothing.

Centrifuge implicitly endorsed this issuer by onboarding him, and cannot stand by passively while nervous investors are left in in the dark. To do so would be a betrayal of Centrifuge users’ trust.

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Blockquote Please contact the issuer concerning this pool if you have any questions or worries

All emails to Davoa are going unanswered. Besides, as others have stated, I think pro-active communication is very much in order here.

So is the legal review not on-going yet @christiancdpetersen ? I think this should be the most important priority now for the Centrifuge protocol. Especially while other related damages could potentially still be avoided.

With respect @Tjure07 , given the gravity of the situation, generic admin answers aren’t really helpful here. Why is Fabien, Davoa, or the Centrifuge team not responding here?

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I tagged @Fabien in my previous reply already and hopefully he will chime in this thread to leave a statement on the current status

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Thanks, @tjure07. I have just come across this new thread.
I will respond to this message within 24 hours. Please be aware that we have been engaging with our stakeholders and investors.

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