Yat Siu is not any stranger to controversy. Through the years, the serial expertise entrepreneur has been kicked off the App Retailer, delisted from a inventory change and has clashed along with his auditors.
However Siu, by his Hong Kong-based Animoca Manufacturers car, has change into the pre-eminent investor on this planet of blockchain-based gaming, introduced by its promoters as the subsequent huge factor within the international video games trade.
He has offered his backers a imaginative and prescient of digital property rights in video video games, the place gamers can personal their in-game objects as non-fungible tokens (NFTs) recorded through blockchain, earn as they play, and revenue from buying and selling with different gamers. The collision of crypto and gaming has been one of many most-hyped potential makes use of for blockchain expertise.
As crypto boomed in 2021, the 49-year-old rode the speculative wave as Animoca offered NFTs linked to a portfolio of investments in nearly 400 start-ups. A funding spherical in 2022 featured a $5.9bn valuation and the backing of a number of the main names within the funding world.
However as a “crypto winter” set in over the trade following a string of company disasters and a collapse in asset costs final yr, Siu nonetheless faces severe questions over Animoca’s enterprise mannequin, regulatory compliance and governance.
The corporate has change into a check case for whether or not any of the potential improvements from blockchain will survive the crypto sell-off. If it stumbles, so too could the trade that Siu has helped will into existence .
“When the predominant enterprise is issuing tokens from zero and promoting them to retail, it’s not a simple enterprise to maintain long run,” says Antonas Guoga, a former Animoca investor. “Most likely 99 per cent of the tokens are going to zero.”
But when Siu proves his sceptics incorrect, Animoca’s a whole bunch of investments may put it on the centre of what some assume will likely be a revolution in gaming that proponents declare will take energy away from distributors and put it within the palms of gamers.
“He’s confirmed time and again to be the man who can get out of any state of affairs,” says one other affiliate extra bullish about Siu’s prospects.
The story up to now
When the pandemic hit in 2020, Siu was on the helm of a little-known Hong Kong app developer that had simply been delisted from the Australian Securities Trade.
Animoca, perennially lossmaking, had meagre revenues and a document of churning out largely forgettable cell video games, together with a grab-bag of investments in unloved blockchain ventures.
Its mainstay for years had been cell video games primarily based on well-known franchises like Garfield or Thomas the Tank Engine. Animoca would license the mental property rights and package deal them into free-to-play video games.
Siu, cheerful and self-deprecating, has been a fixture of the Hong Kong start-up scene for many years. He was born and raised in Austria, educated as a musician earlier than changing into a programmer after which started launching corporations after transferring to Hong Kong in 1996. One former worker calls him down-to-earth. “Lots of people in crypto purchase Lambos . . . he goes climbing along with his spouse.”
As dotcom mania ramped up he launched a web-based messaging service referred to as Outblaze, later described by BusinessWeek as a enterprise that had “outlasted the bubble”. Siu offered the messaging belongings to IBM in 2009 and together with a core of Outblaze lieutenants, pivoted to cell video games.
Animoca punched above its weight partly by enjoying the App Retailer’s rankings. “What we discovered is that if we launch an app each week, and cross promote, we’ll at all times be the highest,” he says. The video games usually appeared to customers underneath totally different writer names.
Apple seen the ways as manipulation and eliminated the corporate’s apps in 2012. Although Animoca was allowed again in by 2013, the reputational results lingered. “We really turned, slightly bit, pariahs,” he says.
The next yr, he listed Animoca by reversing right into a listed shell firm in Australia and by late 2017 was experimenting with investments in AI and crypto tokens. Siu was an early investor within the firm behind the unique NFT bubble, CryptoKitties, which concerned buying and selling digital cats.

He describes his investing technique as ecosystem constructing — the extra blockchain-based companies he backs, the extra probably it’s that the market as a complete will develop. He acquired one start-up, Leade.rs, in an all-share deal partly to evangelise about digital property rights to its backers, who included LinkedIn founder Reid Hoffman.
Moreover the CryptoKitties supernova, Siu’s esoteric investments appeared unlikely to ever repay. Animoca misplaced cash and was always fundraising small quantities. To protect money, Siu usually structured investments as share swaps or threw in crypto tokens as consideration. “He’s extremely artistic and versatile in his capacity to make offers,” says Mikhael Naayem, the co-founder of Dapper Labs, the corporate behind CryptoKitties.
However when Covid-19 arrived, prompting governments and central banks to inject trillions of {dollars} into the worldwide economic system, crypto hypothesis boomed and out of the blue Animoca had hit the massive time.
The growth, and bust
Within the seven months to April 2022, the corporate reported $721mn in revenue from NFT gross sales and beneficial properties on investments. It valued its start-up portfolio at $1.5bn and stated it had an additional $4.2bn of “digital asset reserves” not counted on its steadiness sheet.
“Was it sensible? . . . We had been simply fortunate,” says Siu. “We had been simply executing the enterprise, and it simply occurred. I’d like to take credit score.”
The bonanza was largely down to a couple bets that Animoca made again within the doldrums of 2018 and 2019. These included OpenSea, an NFT buying and selling platform, the SandBox, a digital world the place gamers should buy “land” and construct their very own video games, and Axie Infinity, the token-based sport that critics declare is akin to a pyramid scheme.
Siu had been amongst a handful of backers of start-ups that had been out of the blue common with buyers. For founders, funding from Animoca was an indication of credibility, that “you’re tuned into the ecosystem”, as one cell gaming govt places it.
Animoca additional boosted its revenues by issuing new tokens or buying tokens issued by its portfolio corporations cheaply after which promoting them at excessive costs.
“When you bought into crypto with some form of {dollars} behind you in 2017 and 2018 . . . you probably did insanely effectively by no fault of your personal,” notes one banker who works with crypto corporations. “You possibly can have thrown a dart at a token and gotten 20x.”

Siu raised a whole bunch of tens of millions of {dollars} from high-profile buyers on the again of that dart throwing. A number of funding rounds culminated with the two-tranche deal in 2022 that valued the group at $5.9bn and was backed by Sequoia China, Winklevoss Capital, London’s Kingsway Capital and Soros Fund Administration.
Animoca additionally created NFTs from conventional franchises and types, a talent Siu had been “honing . . . for a few years in free to play [gaming]”, the cell gaming govt says.
One undertaking concerned Components 1 NFTs tied to a sport referred to as Delta Time launched in 2019. Gamers may purchase their very own digital automobiles. A giant purchaser was Guoga, a poker participant and Lithuanian politician who spent an in-game token value $77,000 on a single automotive in December 2020.
However the collapse within the crypto market was as dramatic as its rise, and the affect has been clear within the token markets on which Animoca constructed its success. Delta Time closed final yr after Components 1 declined to resume the rights. The digital automobiles are all “nugatory” now, says Guoga, including that he offered his personal Animoca shares “on the high” final yr. “The market gave the impression to be very inflated”.

Cryptocurrencies could have rallied up to now this yr, however of the 13 tokens Animoca lists on its web site as these it issued, 11 are down by greater than 90 per cent since their peak. The opposite two have fallen no less than 30 per cent. OpenSea, one of many jewels in Animoca’s portfolio and valued at $13bn in January 2022, noticed its NFT buying and selling volumes additionally plummet 85 per cent final yr.
Animoca shares, which had peaked in January 2022 at round A$4.60 a share on a secondary marketplace for non-public corporations, PrimaryMarkets, final traded at A$1.40.
The retreat of cash from the speculative fringes of the expertise sector additionally centered consideration on how few individuals had been really taking part in crypto. Sandbox, thought-about Animoca’s finest shot at a breakout hit, stated in December it had 30,000 each day customers. High mainstream video games sometimes rely their each day customers within the tens of millions.
Sandbox’s chief working officer Sebastien Borget says the corporate has stored rising regardless of the crypto downturn. “The exercise of the metaverse will not be depending on the cycle of the cryptocurrency markets,” he says.
Sandeep Nailwal, the co-founder of blockchain platform Polygon, says his trade continues to be “very very small, minuscule”, particularly relative to valuations being secured in 2021 and 2022. “The valuations are method off . . . orders of magnitude overvalued,” he says.
In September, Siu introduced a $110mn funding spherical that mirrored new realities. Buyers led by Singaporean sovereign wealth fund Temasek stumped up a convertible mortgage notice slightly than straight fairness.
“Everybody principally bought fairly terrified,” he says of final yr’s crypto collapse. The notice is a three-year mortgage at 10 per cent, based on Siu. “It’s not low cost, however it’s not loopy.”
Crusing near the wind
However Siu’s enthusiasm for crypto and his freewheeling funding method has additionally been a supply of bother for Animoca through the years.
In March 2020, the Australian Securities Trade terminated Animoca’s itemizing. On the time, the corporate cited a letter from the change complaining of governance failings, novel financing contracts, and its heavy involvement in crypto.
However the letter, seen by the Monetary Occasions, stated Animoca’s disclosures and crypto investments had violated no fewer than 17 of ASX’s itemizing guidelines. The change accused the corporate of getting a “wilful disregard” for its rules, and expressed “severe considerations that [Animoca] doesn’t have satisfactory methods and controls in place to handle its reporting and disclosure obligations”.
Siu says the ASX simply “didn’t like crypto” and that “once they determined to go after us, they only threw the ebook at us”. He provides {that a} detailed response to its criticisms was met with a cursory reply. The change didn’t reply to a request for remark.

Although delisted, Animoca nonetheless has 1000’s of shareholders and is obliged to file public accounts in Australia. Its final set of numbers ran to the tip of 2019 and it solely filed them final yr — shortly after being convicted and fined A$50,000 by the Australian Securities and Investments Fee for failing to take action beforehand.
Animoca had failed to answer Asic’s criticism; Siu calls the oversight “a little bit of a shitshow”. He says the Asic discover had not been collected from a service handle due to Covid-related journey restrictions. The corporate has acquired an extension to the tip of March for its 2020 accounts and says it can file its 2021 and 2022 figures “this yr”.
The delays in submitting stem partly from tussles with its auditors, disagreements that Siu blames on novel questions on accounting for crypto belongings. Complaints from Animoca’s former auditors, Grant Thornton, appeared extra prosaic, based on a March 2020 letter seen by the Monetary Occasions, which was triggered by Animoca not “offering high quality data in a well timed method” referring to the 2019 accounts
The accountancy agency, which had audited Animoca because it listed, painted an image of undocumented and opaque dealings, together with with associated events, and stated there was “little if any documentary proof accessible [to] assist the investments made” by Animoca.
“Our audit procedures up to now have indicated important dangers of administration override of controls, potential for undisclosed associated occasion transactions and undisclosed commitments for expenditure,” it added.
Animoca stated it addressed the factors to Grant Thornton’s satisfaction and that the Covid pandemic triggered issues and delays with audits at many corporations. However it nonetheless changed Grant Thornton with DFK Collins, a smaller Australian accountant, on the finish of 2021. “GT struggled with our enterprise . . . they didn’t actually perceive it,” Siu says.
He acknowledges that Animoca didn’t have all of the documentation the auditors wished, however says that was to be anticipated given the character and dimension of the investments he was making.
“It’s not like we undergo three months due diligence on a half 1,000,000 greenback funding,” he says, arguing it’s pure that there’s no formal valuation report on such offers. “I don’t assume if we had been in America, coping with a tech auditor, that we’d have had these points.”
However former staff, individuals who have run Animoca portfolio corporations, and others with information of the corporate gave comparable accounts of a enterprise with chaotic inner processes and weak governance, the place choices had been made largely on the idea of Siu’s intestine feeling.
Traditionally, Animoca has been staffed by long-time associates of Siu, they stated. The corporate was incubated by Outblaze, the place Siu’s spouse had been head of HR. Its head of enterprise investing is James Ho, Siu’s brother-in-law, whose private fund was among the many co-investors in a start-up that Animoca backed in 2021. Animoca stated such co-investments had been frequent trade observe
In September, Animoca employed a brand new chief monetary officer, group HR director and head of authorized. Evan Auyang, who joined as group president of Animoca in 2021, says the corporate has considerably expanded its finance and authorized capability and professionalised its operations.
He says that when he joined, he requested Siu whether or not he was “able to have a crew round you who would problem him, and he welcomed that.”
Assured sooner or later
Animoca is within the midst of attempting to boost a enterprise fund as huge as $1bn, although it’s unclear if there may be sufficient demand. Siu says the fund may act as a follow-on investor within the offers that the corporate has already backed.
In November, after the FTX collapse, Siu launched contemporary monetary particulars to reassure shareholders his firm was stable. He stated Animoca had $214mn in money, digital belongings of $940mn and “off-balance sheet digital reserves” of $3bn. He says it has no debt, is “money circulation constructive” and is producing income from a variety of actions.
Within the coming 18 to 24 months, he claims Animoca’s blockchain-gaming bets will likely be vindicated by mass adoption.
In the meantime, he’s already pursuing new strains of enterprise round his “huge northstar” of digital property rights. One new push is NFTs created by academics. “We’re attempting to create a monetary asset class out of content material created by academics in order that they’ll take part in capital formation,” he says. Final month, Animoca additionally led a seed funding into the relaunched MoviePass, the cinema ticket service that collapsed in 2020.
Siu attributes his fascination with true digital property rights partly to his experiences with Apple again in 2012. “It’s positively made me really feel far more stronger in regards to the threat of centralised platforms,” he says.
And regardless of the chaos in crypto markets, he’s outwardly unfazed. “It’s fairly chilly, however it’s not as chilly because it was 4 years in the past.”
Knowledge visualisation by Cleve Jones
This text has been up to date with the proper title for Sebastien Borget