Backers of Sky Mavis, the blockchain-gaming company that was hit by one of the biggest-ever crypto hacks last month, have extended it a $150mn lifeline, helping to reimburse Axie Infinity players for their stolen funds.
Hackers stole more than $600mn worth of cryptocurrency from Sky Mavis’ blockchain system, the Ronin Network, on March 23.
Despite criticism of the Vietnam-based company for not discovering or disclosing the attack sooner, as well as a slowdown in users that had begun even before the hack, Sky Mavis has secured funds from crypto exchange Binance — a new investor — and existing backers including Andreessen Horowitz, Accel and Animoca Brands.
Most of their $150mn investment takes the form of a secondary offering, in which Sky Mavis’ founders sold down their personal shareholdings.
Aleksander Larsen, chief operating officer of Sky Mavis, said he and his co-founders would use the cash proceeds from the share sale to pay back gamers whose funds were stolen.
“We are taking responsibility for this situation — we feel we should have done better,” he said.
The “very nice gesture” has helped win back investors’ respect, said Yat Siu, chair of Animoca, which is also an investor in Yuga Labs, the company behind Bored Ape Yacht Club, and several other crypto and NFT properties. “They wanted to demonstrate that they are here for the long term.”
Andrei Brasoveanu, partner at Accel, said that he believed the company had made the right moves to secure its tech platform in future and managed to retain the goodwill of much of its community of players. “The team has been a class act and I’ve been really impressed with how they handled this,” he said.
Two-thirds of the funds that were stolen were from users. Around $200mn was from the Axie Infinity treasury of revenues from the monster-hunting game, which Sky Mavis is working with law enforcement to recover.
Axie Infinity has become the world’s most prominent blockchain-based video game, making it a closely watched test of the utility of non-fungible tokens and crypto assets beyond financial trading and speculation. In October, Sky Mavis raised $152mn in venture funding at a valuation of around $3bn. Larsen would not comment on the valuation of its latest round.
The Pokemon-style game has attracted controversy for its business model, which depends on buying and training monsters that can then generate cryptocurrency. A decline in the price of its in-game currency over recent months, in part because of changes made by Sky Mavis to how the game works, triggered a sharp fall in the number of players from a peak of almost 1.5mn late last year.
Last month’s hack came just days before Sky Mavis was due to release a new version of its game, Axie Infinity Origins, which is free to play and offers more polished graphics and gameplay than its predecessor. Players will be able to use the Axie characters from the original game that they bought as NFTs in Origins, which the developer hopes will appeal to a more mainstream audience.
The first game generated $1.3bn in revenues last year, according to Larsen, although the four-year-old company struggled to keep pace with its sudden rise.
“This attack . . . is a direct result of trade-offs because we are growing so fast,” Larsen said. “The security and everything around it really can’t keep pace.”
He added: “Going forward, lesson learned, we are prioritising security.”