Original article: Jeff Dorman , Chief Investment Officer, Arca

Compiled by: Yuliya, PANews

As the issuer of USDC stablecoin, Circle's IPO should have been an important milestone for the crypto industry to move towards mainstream finance. However, the issuance process has caused widespread controversy in the crypto circle. In this article, Arca Chief Investment Officer Jeff Dorman, from an eyewitness perspective, strongly criticized Circle's behavior of favoring traditional financial institutions and ignoring native crypto participants in IPO placements, and used this to explore why the core concept of the crypto industry, "aligned interests", has been repeatedly violated in the traditional IPO system. The following is the original article, which was compiled by PANews.

Arca accuses Circle of betrayal: Why did the IPO feast abandon its crypto allies and favor Wall Street?

Circle, the company behind the USDC stablecoin, completed its initial public offering (IPO) last week, pricing its shares at $31 per share (higher than the initial expected range of $24 to $26). The first-day closing price was $84, and by the end of the week, the stock price was over $107. It would be an understatement to say that the investment banks had badly mispriced this IPO. It would also be an understatement to say that Wall Street is enthusiastic about crypto assets, especially stablecoins.

Bullish reasons for CRCL:

This is the first and only listed investment target on the market that focuses on the growth of stablecoins. Investors have been waiting for this investment opportunity for seven years (Arca included).
The stablecoin market is expected to grow to over $1 trillion in assets under management, which alone makes for a good investment story.
USDC currently has $60 billion in assets under management, with an annual growth rate of 91%.

Reasons to be bearish on CRCL:

This is a business model that is completely dependent on interest rates, with all of its revenue coming from interest income;
Circle relies on Coinbase as its issuing agent, and Coinbase takes about half of the interest income;
Circle also relies on BlackRock, which has partnerships with many banks that are trying to enter the stablecoin market to compete with Circle and Tether;
Over the past three and a half years, the company has had almost no revenue and earnings growth (although EBITDA has grown 60% year-over-year);
The current share price of $107 is overvalued, and its valuation indicators are as follows:
- About 30 times the gross profit;
- About 110 times the return;
- Adjusted EBITDA is approximately 59 times. (Annualized based on the first quarter of 2025)

Arca accuses Circle of betrayal: Why did the IPO feast abandon its crypto allies and favor Wall Street?

About my open letter to Circle CEO Jeremy Allaire

Many of you may have seen a tweet I posted and subsequent news coverage of the open letter to Circle CEO Jeremy Allaire. The language in the tweet was somewhat strong, and I have deleted it as it does not represent the official position of Arca. But I want to be clear that I still stand by the core points I expressed.

In my opinion, Circle made a huge mistake by choosing to allocate shares to traditional financial institutions (TradFi) rather than crypto-native funds during the IPO allocation process. They should be held accountable for the implicit message behind this decision.

We have communicated with many crypto funds and companies, including many early users and promoters of USDC (including Arca itself), and some of them have closer relationships with JPM and Citibank, the underwriters of the IPO, than Arca. We received clear feedback from these industry leaders that they either received very little allocation or no allocation at all, which further confirmed the fact that Circle favors traditional Wall Street financial institutions and ignores crypto native supporters.

I have yet to find a single crypto-native institution that was treated fairly in this IPO placement. This situation is simply ridiculous and shows extremely short-sighted behavior by Circle.

Why am I angry? Not because of emotion, but because of principle

Those who know me or have worked with Arca know that I am not an emotional investor. On the contrary, whether in good or bad market conditions, I always remain rational and focus on investment logic rather than personal emotions.

But when it comes to advancing the crypto industry “right” and upholding integrity, I am extremely passionate and emotionally invested.

Arca has been at the forefront of the crypto industry, speaking for and fighting for it since its founding in 2018. We have spent a great deal of time, launching and winning activist actions against crypto companies that have been mismanaged and harmed the interests of investors or customers. Many people believed that token holders had no rights - we overturned this misconception and risked our reputation in the process, but we think it was worth it.

We have been exposing what we believe to be fraud and misconduct in the industry, even if it means having some very uncomfortable conversations with friends or partners. It is worth it. We have also publicly criticized the traditional financial sector for misunderstanding and misclassifying the crypto industry many times - such as lumping all tokens together and ignoring the significant differences between them.

We have also pointed out that some companies in the industry have deliberately distorted the narrative for their own benefit, to the detriment of their peers in the industry, and we have always been forthcoming about our mistakes and are committed to continuing to do so.

We work tirelessly to educate the world on the pros and cons of crypto technology, with the goal of allowing investors and users to make informed decisions based on facts rather than being misled by the media or other untrustworthy entities.

Ultimately, we support crypto in all its forms. Misunderstood or not, we believe it is our responsibility to use our voice to expose fraud, expose bad apples, and call out poor decisions — all in order to make the industry stronger and healthier in the long run.

This time, we are issuing a citizen’s arrest warrant against Jeremy Allaire and Circle—your actions are contrary to the original intention of encryption.

I am not an idealist, I just believe in "customer first"

I am not a naive idealist. I truly believe that when you make your customers wealthy, your company will naturally become wealthy.

achievement.

Look at Binance, Hyperliquid, and even projects like Axie Infinity. Even in the face of difficulties now, their founders, employees, customers, and investors still maintain a high level of satisfaction. Why? In one word: "Alignment".

This is not a new concept. Back in 2018, when Arca didn’t even have a website, I wrote about the lack of alignment of interests in the stock market.

In 2020, I criticized Airbnb and DoorDash for not sharing financial benefits with their customers during their IPOs. I also wrote about Coinbase's attempt to issue stock through a direct listing, which was a respectable attempt, although it also had risks - such as no investment bank support to educate investors.

I have been emphasizing for the past eight years that tokens are the greatest capital formation and user growth mechanism ever because they instantly align the interests of all stakeholders and turn customers into core users and brand evangelists.

However, Circle completely and willfully ignored its customers during this IPO.

Arca's multi-year partnership with Circle - why this IPO placement is a slap in the face

I can't speak for all the other funds (although many have stood with Arca and expressed outrage at the unfairness of the IPO allocation), but I can clearly speak for Arca.

Arca has been a Circle customer and partner for nearly a decade. We used our platform to support and promote USDC when it was still unrecognized and had almost zero assets under management. We have defended USDC and the entire stablecoin space, confronting those institutions that called the entire industry a "joke."

Our trading and operations teams work alongside the Circle team, standing by them and providing practical assistance in product testing, optimization suggestions, and major crises (such as the March 2023 banking crisis and the USDC depegment incident).

However, in this IPO, we only received a very low allotment ratio, which was a slap in the face.

Crypto companies like Arca have survived the past eight years in a very difficult and challenging environment. This industry is full of people and companies supporting each other and moving forward together. When you have the opportunity to benefit your clients through an IPO, thereby increasing their returns and AUM - which will ultimately benefit the industry - it should be the obvious right choice.

Why not reward those funds that have been deeply involved and continue to invest in the crypto industry? If these funds get good returns, they can raise more funds and invest again in the crypto ecosystem. Isn’t this a virtuous cycle for the industry?

But Circle did the exact opposite.

Their behavior is completely contrary to the spirit of encryption

Circle did not express gratitude to users and achieve long-term win-win results by issuing tokens or creating some kind of interest binding mechanism, but generously allocated IPO shares to mutual funds and hedge funds in traditional finance. These institutions probably did not even read the prospectus, did not have digital wallets, and would not actually use Circle's products.

They just want to make a quick buck.

To those who are angry with me, I would also like to respond:

“You Arca are like those crypto users who want to get free airdrops and think they should get benefits just because they use the product!”

A: This is partly true and partly wrong. Indeed, we agree with the concept mentioned above that “customers should be rewarded.” Any customer who has a direct impact on business growth, no matter how big or small, should be rewarded in some way.

DoorDash’s delivery drivers and customers should have received DASH stock. Airbnb’s hosts and guests should have received ABNB stock. Amazon Prime members and merchants should have received AMZN stock. The examples go on and on.

But one thing that’s different between an IPO and an airdrop is that we’re willing to buy shares at the same price as everyone else. Airdrops are usually free gifts. More importantly, the allocation of airdrops is often based on an algorithmic formula, which is transparent and automated; while IPO allocations are a manual process, and Circle has full control over who gets how much.

“You should blame Citigroup and JPMorgan Chase, not Circle!”

Answer: This is completely wrong.

I used to be an investment banker in the capital markets and also worked as a trader. I have been working with the syndicate desk for nearly ten years and I know how the entire process works.

Indeed, investment banks are responsible for creating market demand, setting prices, and collecting initial interest from institutional investors, but the final decision on the allocation list and ratio is made by the sponsor (Circle).

Circle is the client of this transaction. They pay high fees to lead underwriters such as Citigroup and JPM and have full final say. They have the right to view all orders and can directly control who gets how much share.

No matter how good your relationship with the underwriter is, it is not as important as your direct relationship with the issuer's executives.

By the way, Arca's trading of traditional assets such as stocks, bonds, and preferred stocks is probably larger than most other crypto funds. We even helped Galaxy (GLXY) when it had difficulty issuing convertible bonds in 2022, tripling the subscription amount to help it complete the fundraising (the lead underwriter was Citi, who praised Arca at the time).

But even so, large investment banks still do not give priority to small crypto funds in the allocation process. Therefore - the responsibility for this allocation lies with Circle, not the underwriters.

Circle’s choice to ignore the needs of crypto funds is either negligence, incompetent management, or more likely intentional.

Arca accuses Circle of betrayal: Why did the IPO feast abandon its crypto allies and favor Wall Street?

“The IPO was oversubscribed 25 times — everyone’s allotment ratio was squeezed!”

Answer: This statement is not entirely true.

Don’t forget, this is Circle’s second attempt at an IPO. (The first time they failed and were eventually forced to withdraw.) This IPO was not going well when it first started its roadshow in April this year. There were many reasons - the macro market was weak due to tensions over trade tariffs,

Circle’s lack of profitability and its reliance on interest rates and partners have also raised many questions.

The deal was difficult in the early stages, but it suddenly became popular near the end of the pricing period. Why? Because the market began to realize that the stock was likely to rise after listing, so a large number of investors frantically submitted large orders at the last minute.

The order mechanism of IPO is a game of "cat and mouse". In order to get a larger allotment, many investors will deliberately place an order far higher than what they actually want, betting that they will get a satisfactory proportion in the end.

Early buyers like Arca reported real subscription demand before the entire order book was established, and we should have received our share on demand. However, we were completely marginalized in this operation.

The so-called "25 times oversubscription" title is likely just a "masquerade" on the final data and cannot reflect the actual fairness.

"Stop complaining - that's just sour grapes!"

A: Yes, that’s exactly the purpose of this article.

It is still unknown whether Circle’s IPO placement will have an impact on its future and the adoption of USDC.

But we are very much looking forward to the upcoming 13F filing (institutional shareholding report disclosed by the US SEC) to see which investors Circle has chosen to share their growth dividends.

稳定币USDC发行量突破230亿美元，创历史新高

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