[TFIP-24]: Proposal to Appoint Type3 as TrueFi Credit Risk Advisor

Proposals
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Abstract:

Type3 formally proposes to the TrueFi DAO to be appointed as a dedicated Credit Risk Advisor (CRA). We aim to leverage our expertise in traditional finance and our upcoming Global Corporate Finance License from Mauritius to onboard high-quality, tokenized product offerings onto the TrueFi platform. Our strategy combines global sourcing efforts, a robust due diligence framework, and the strategic use of technology and outsourcing to ensure efficient and compliant operations. The value alignment of our offering is underscored by a proposed KPI-driven remuneration schedule, highly weighted towards attracting TVL to our upcoming vaults, achieved in partnership with Enclave Digital Wealth, an SEC-registered RIA. We believe this will significantly contribute to TrueFi’s growth in the Real-World Asset (RWA) sector and provide attractive, risk-mitigated opportunities for the TrueFi community.

Motivation:

TrueFi has established itself as a leading protocol in decentralized lending, with a growing emphasis on RWAs. Type3 recognizes the immense potential in bridging institutional-grade financial products with DeFi liquidity and composability. Our core value proposition is to source and onboard traditional fund clients seeking to tokenize their fund offerings. This initiative will bring a new class of institutional-grade assets to TrueFi, enhancing diversification and yield opportunities for lenders.

Type3 Capital

A team comprising crypto natives, traditional finance professionals, and entrepreneurs, Type3 possesses leveraged loan, private credit, and structured finance origination, underwriting, and loan management experience from institutional and startup environments. Mandated by funds, corporates, and protocols, Type3 is KPI-driven and goes the extra mile to deliver.

Enclave Digital Wealth

Enclave Group is a private consortium built for founders, families, and digital asset investors who live outside the traditional system. Through Enclave Digital Wealth (RIA) and Private Circle (multi-family office), we deliver discreet, high-touch management of wealth, privacy, and global structures -integrating asset protection, entity control, and crypto-native strategies under one roof.

We are in the final stages of securing our Global Corporate Finance License from the Financial Services Commission (FSC) of Mauritius. Enclave Wealth Group, as an authorized SEC Investment Advisor, will be able to recommend TrueFi Vaults to its client base. These licenses underscore our commitment to operating within a recognized regulatory framework and adhering to international best practices for financial services. This regulatory standing will provide an additional layer of assurance to the TrueFi DAO and its lenders.

Proposed Scope of Work as Credit Risk Advisor:

As a TrueFi Credit Risk Advisor, Type3 will undertake the following key responsibilities:

1. Sourcing and Onboarding Various Users for Truefi Vaults:

  1. Borrowers / Lenders in Crypto Native and RWA space

  2. Tokenized Funds

  3. Other users

Our established relationships in the traditional and digital fund sector provide a strong pipeline of potential deals, ranging from tokenized Trade Invoice Funds and Permian basin oil fields.

2. Rigorous Due Diligence:

We will implement a comprehensive due diligence process covering:

  • Fund Assessment: Financial health, track record, management team quality governance, and operational capabilities of the team.

  • Tokenization Viability: Legal and technical feasibility of tokenizing fund interests, including review of LPAs and asset suitability.

  • Credit Risk Analysis: Credit scoring and risk profiling, augmented by AI tools for enhanced analysis.

3. Deal Structuring and Legal Framework:

We will structure credit facilities tailored to borrowers, including defining loan terms, covenants, and collateralization. We will work with legal experts specializing in DeFi and tokenization to prepare robust legal documentation.

4. Ongoing Portfolio Monitoring and Reporting:

We will provide continuous monitoring of active deals, manage client relationships, enforce covenants, and deliver transparent, regular reports to the TrueFi DAO on portfolio performance and risk metrics.

Remuneration Model:

Type3 proposes a remuneration model involving a combination of origination fees and performance-based fees. We propose the following ongoing fee structure:

  • $175,000 every 6 months,
  • $50,000 initiation fee,
  • $25,000 $TRU new vault opening fee:
    • $25,000 bonus for TVL > $200k
    • Additional $25,000 bonus for TVL > $500k, sustained for at least 3 months
    • Additional $12,500 bonus for TVL > $750k, sustained for at least 3 months
    • Additional $12,500 bonus for TVL > $1m, sustained for at least 3 months
    • $50k bonus for incremental $1m up to $10m TVL

Type3 is excited by the prospect of contributing to the TrueFi ecosystem. We believe our specialized focus on tokenized funds, our regulatory standing, and our dedicated team make us a strong candidate for the role. We request the TrueFi DAO community to review our proposal and welcome any questions or discussions.

We look forward to a favorable consideration and the opportunity to build a successful RWA lending vertical on TrueFi.

Thank you for your consideration.

The Type3 Team

1 Like
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Dear TrueFi Community,

After reviewing Type3’s proposal, I would like to offer some constructive feedback and suggest a more efficient approach to risk management contracting.

Key Concerns and Suggestions:

  1. Cost Efficiency:
  • The proposed retainer model ($175,000 every 6 months, initiation fees, and multiple TVL-based bonuses) appears expensive relative to the expected value addition.
  • I believe we should reconsider the structure of our risk management contracts overall. The retainer model, as presented, is a significant fixed cost. Given the competitive landscape and the growing interest from parties wanting to initiate credit vaults, we should explore alternative approaches that balance cost with performance incentives.
  1. Alternative Approach:
  • Rather than committing to a single, high-cost provider, I suggest setting up a Request for Proposal (RFP) process. This would allow us to gauge interest from multiple parties and select the best candidate at a more competitive rate.
  • Additionally, structuring the contract so that payments are made as TVL value accrues to TrueFi would better align incentives. Spreading payments over time and linking them to specific performance metrics would also mitigate the risk of non-performance and ensure better alignment with TrueFi’s growth goals.
  1. Performance-Linked Remuneration:
  • Instead of large upfront retainers, a phased payment plan linked to measurable outcomes (like sustained TVL growth or risk mitigation benchmarks) would better align the advisor’s interests with the protocol.
  • This approach not only reduces initial expenses but also incentivizes long-term success and performance accountability.
  1. Balancing Innovation with Risk Management:
  • While I appreciate Type3’s ambition to bridge traditional finance and DeFi, it’s important to acknowledge that similar promises have not consistently delivered the expected outcomes in the past. Therefore, rather than committing to substantial upfront costs, we should tie any compensation directly to actual risk-adjusted returns.
  • This approach would ensure that TrueFi only incurs expenses when value is demonstrably created, fostering accountability and better aligning incentives.

Final Thoughts:

To maximize value for the DAO, I strongly recommend exploring a more competitive and performance-driven contracting process. This will help TrueFi maintain flexibility, ensure accountability, and make more strategic use of funds.

I look forward to hearing thoughts from the community on this approach.

Best,

Sebastien

3 Likes
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Dear TrueFi Community and Seb Davies,

In response to your letter, please see below an amended schedule of work and further qualification of the value proposal to TrueFi holders.

Cost efficiency

  • The proposed retainer is lower than that paid historically and other bids. The community has evidently already processed the forum post as an “RFP” (see TFIP-26), without delay.

  • A significant component of the compensation is already TVL linked and linked to sustained TVL growth, unlike other proposals.

  • The retainer covers the extensive origination, due diligence, and legal structuring costs required before launching a pool. Our ambitious pipeline should persuade the community and yourself of the significant value potential of our proposal.

  • That being said, to further align incentives, Type3 will also commit to a first loss tranche alongside additional amendments to the previously proposed structure:

    • Reduction in onboarding fee to $30,000
    • Reduction in 6-monthly retainer to $150,000.
    • Provision of progress reports every 2-months.
    • $50,000 bonus for sustained TVL increase to over $500,000 by end of 6 months.

Value Proposition

  • Type3 will make use of the partnership work laid down by Cicada and TrueFi to onboard current contracted clients.

  • TrueFi will benefit from Type3’s investment in global business development over the past year that include strategic partnerships, licenses, and infrastructure investments.

  • Type3 clients include sovereigns, institutional investors, and major infrastructure projects. They have engaged Type3 to help advise and facilitate their asset tokenization strategies.

  • Type3 was recently invited to attend a royal banquet in Abu Dhabi, subsequently advising on a tokenisation initiative for the country’s sovereign assets.

  • Working with specialist fund managers, Type3 clients have fundraising requirements of in excess of $5bn, which range from pre-development solar project financing in Malawi, to producing oil wells in the Permian basin.

  • We are especially excited by an upcoming tokenized US Trade Finance Fund product, with committed TVL, which we see as the natural progression up the risk curve from tokenized treasuries. Moreover, our client bases alignment to addressing UN Sustainability Development Goals opens the prospect of accessing large scale donar grant programmes towards TrueFi vaults, alongside crypto native investor interest.

  • As investors , we are well aware of the failures of previous RWA credit product lines, and plan to mitigate with judicious transaction and legal structuring, insurance, and institutional investment partners.

  • Providing a dedicated origination and risk management function for TrueFi will enable us to focus on providing compelling risk-adjusted yield opportunities to the benefit of $TRU holders.

2 Likes
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I think this is a good compromise for a change and a hopeful chance that there can be TVL grown from different sources.

The value point is good, given that other similar recent quotes for services are more than twice the cost!

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What other proposals are we talking about?
If there are specific proposals, please send links

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Dear TrueFi Community

Please accept our apologies for the procedural error in first posting to tally before snapshot. We wish for our TFIP-25 tally proposal to be cancelled and will submit again under the correct title of [TFIP-24] once snapshot voting has ended.

Best regards,
Type3 Team

1 Like
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It turns out that we tried with Cicada, it didn’t work, now we have to spend another half of that cost in order to fall into the same trap?

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At least 5% of staked TRU must participate in this Snapshot vote to meet the quorum. I’m refreshing results here, but there were at least 2.6 millions of votes needed to get this to reach quorum and pass. There will need to be another vote or amendments to the proposal

https://snapshot.box/#/s:truefi-dao.eth/proposal/0x0ee17defbae3c2e83062e671f2ac4e4dead14272cb5ed174b574c80f534639a1/discussion

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Shouldn’t it be mentioned that a Director on the Truefi board is a cofounder of Type3?