Polychain accuses former partners of illegal secret trading with portfolio companies

Polychain said Ritual co-founder and former partner Niraj Pant violated the company's policies by conducting secret transactions with portfolio company Eclipse Labs.

According to three sources close to the situation and an internal document reviewed by CoinDesk, former Eclipse Labs CEO Neel Somani quietly allocated 5 percent of Pant's upcoming Eclipse cryptocurrency token in September 2022. Just days after Pant instructed Polychain to lead an initial $6 million round of funding for the company.

This distribution was eventually reduced to 1.33%, worth $13.3 million based on the fully diluted valuation of the most recent private investment round of tokens. (According to sources close to Eclipse Labs, the company's latest funding round had a fully diluted valuation (FDV) of $1 billion for the token.)

Founded by Olaf Carlson-Wee, the first employee of cryptocurrency exchange Coinbase, Polychain is one of the largest cryptocurrency venture capital firms with over $11 billion in assets under management. Pant served as a partner at the firm from 2017 to 2023, where he was responsible for putting the firm's venture capital into promising crypto startups.

Pant is now a co-founder of blockchain AI startup Ritual, another Polychain investment.

Eclipse Labs has built a blockchain that blends the popular blockchain technologies Solana and Ethereum. After leading Eclipse's initial funding round in August 2022, Polychain then participated in the company's $50 million Series A round in March 2024.

Pant led the initial funding deal, and CoinDesk's investigation shows that around the same time Pant acquired Eclipse cryptocurrency tokens as Polychain itself. According to CoinDesk's sources, the deal was not disclosed to most Eclipse executives, advisers, or big investors.

Pant insisted that the arrangement was fully compliant, as the deal was only finalized in September 2022, after Polychain had already invested in Eclipse. He shared legal documents with CoinDesk showing that his "advisor" allocation was revised to 1.33 percent in 2024, but declined to comment on the size of his initial stake or why it was revised.

Polychain told CoinDesk that it was not aware Pant had a financial stake in Eclipse until after he left the company in 2023. The fund said he should have disclosed the trades in accordance with company policies designed to protect the company and its investors from conflicts of interest.

"Polychain was not aware of Pant's financial relationship with Eclipse until after his departure," a Polychain spokesperson said in an email to CoinDesk. Polychain has well-established policies and procedures that address the behavior of employees in their advisory roles. It was only after Pant left Polychain that the company learned of his violation of these policies and investigated the issue.

Polychain's statement to CoinDesk offers a rare insight into the processes behind cryptocurrency venture capital firms and their investments. Venture capital firms rarely publicly discuss personnel matters or deal structures, and Polychain did not publicly disclose Pant's policy violations until CoinDesk contacted them for this story.