Summary:
In early 2023, DWF Labs emerged from nowhere and seemingly invested hundreds of millions of dollars in hundreds of cryptocurrency companies.
But where did this company come from and how did it have such ample cash reserves?
This article dives into the company’s history to see how it has evolved over the past five years and how it became closely connected to two mysterious Swiss high-frequency trading firms.
In 2018, Andrei Grachev had a tough problem to solve.
At this point, Grachev was still somewhat new to crypto. Born in Uzbekistan, he studied organizational management at Orenburg State University and then worked as an oil trader for two years, according to his company-recorded bio. He entered the crypto space in 2016 by running a small mining farm and doing some personal trading. Two years later, at the age of 30, he became Huobi Russia’s CEO. His only problem? He was desperate for volume, he later told BlockBeats.
A lawyer Grachev knew provided him with a solution. The lawyer mentioned that a small high-frequency trading (HFT) firm in Switzerland was seeking low interest rates from the exchange (according to a recent interview Grachev gave on the Steady Lads podcast), which would have a significant impact on its trading profitability.
Grachev jumped at the opportunity, but it came with another problem. Huobi Russia is a local exchange officially licensed by Huobi Global (now known as HTX) through its cloud program. That means it’s able to use its brand, software and trading liquidity, according to a person familiar with the matter. But it must get approval from headquarters for major decisions, such as token listings and customer trading rates. Grachev told BlockBeats that it took him two months to convince the exchange to allow him to offer preferential rates to the Swiss HFT firm, giving it access to Huobi’s liquidity cheaply through a Russian proxy.
The high-frequency trading firm deposited only $50,000, but by the end of the day, it had traded $10 million. The next day, that number rose to $22 million. “It was crazy,” Grachev said in an interview with BlockBeats.
Andrei Grachev speaks at an event hosted by Huobi Russia. Image: Huobi Russia.
When Huobi Russia officially launched on December 8, 2018, Grachev unsurprisingly hyped up the recent trading volume, attributing it to the high interest and participation of the Russian community.
Little did Grachev know at the time that this was just the beginning of a strong partnership that would eventually see him join forces with the young HFT firm to create one of the most influential and controversial companies in the crypto space, one that would influence over 400 projects and allegedly blew away hundreds of millions of dollars. And it would bring Grachev fame and attract attention and scrutiny from the entire crypto community. The company would later be called DWF Labs, and this is its origin story.
2018-2019: The early stages of digital finance
Three days after Huobi Russia officially launched, 2,500 miles away, the high-frequency trading firm was legally registered in Risch, Switzerland. Corporate records show that the company was named Digital Wave Finance, and its stated purpose was market making and proprietary trading.
The high-frequency trading firm is run by brothers Marco and Remo Schweizer and Michael Rendchen, according to a person familiar with the matter. All three are traders who worked closely at market-making firm IMC Trading and are proficient in automated trading strategies. Their goal is to apply these types of strategies to cryptocurrencies.
Marco Schweizer is a man who rarely posts photos of his daily life online. According to people familiar with the matter, he is of medium build, dark hair, and has a doctorate in physics from the Swiss Federal Institute of Technology in Zurich (the university declined to comment). They describe him as money-oriented and eager to become a billionaire.
The Digital Wave Finance logo. Image: Digital Wave Finance.
The person said Remo Schweizer is similar to Remo Schweizer but thinner, often wears a baseball cap to cover his thinning hair, and said he previously studied computer science. As for Rendchen, according to his LinkedIn profile, his native languages are Polish and German, and his profile photo also shows that he also has black hair and a thick beard.
Throughout 2019, Digital Wave Finance continued to trade on Huobi Russia as the business scaled up.
In December, an independent entity called Digital Wave Assets was established in Zug, with early board members including Remo Schweizer, Rendchen and Louis Bisang, a former board member of Digital Wave Finance. According to internal messages seen by The Block, shortly after the company was established, Marco Schweizer said the company was responsible for managing funds from third parties.
It was reported that Digital Wave Finance had received millions of dollars in interest from third parties at the time, but the trading company rejected external funds at the beginning because its own funds had reached capacity. The company later stated publicly in a financing speech that it had no external investors.
Bisang left Digital Wave Finance in June 2020. That year, Digital Wave Assets transformed into an asset management and securitization company called Digital Waves, where Bisang served as chairman, according to his LinkedIn profile and company records. The agency was later regulated by VQF, a self-regulatory body, according to its website.
“We have heard of Digital Wave Finance/DWF Labs, but the individual shareholders have limited involvement with either company. There has never been any active business, collaboration or transaction between Digital Wave AG (DWA) and DWF/DWF Labs,” said Tobias Straube, COO of Digital Waves.
2019: Faced multiple charges
During this time, Grachev has had a challenging year.
In February 2019, Grachev spoke at an event organized by the DealShaker platform, which is closely associated with the $4 billion pyramid scheme OneCoin. According to an article by local media Forklog, which was confirmed by a Russian-speaking spokesperson via Google Translate, Forklog said this took place after a previous meeting, which Grachev described as a training seminar. Grachev told the media that he was not aware of the platform's activities at the time.
In April, Forklog published a second article referring to a video call with OneLife, one of the companies behind OneCoin. In a previous video on YouTube, Grachev reportedly said that negotiations on listing OneCoin on Huobi had been going on for nearly a month and that he was confident that a deal would be reached in the second quarter of this year. Grachev told Forklog that the exchange had not received any application or documents to list the token, but did not comment on his statement.
In a second article, Grachev also faces allegations that he failed to repay a $10,000 debt to the owner of an asset management company, and that he also did not repay $157,000 that investors provided for his 2018 ICO project called Export.Online – the collapse of which was described as a “qualitative leap” in development.
As of September, Grachev was no longer Huobi Russia’s CEO, though he still worked there as a partner for a year, according to a recent interview with Foresight News. He was replaced as CEO by Vladimir Demin, according to a press release at the time.
Image: Jiamix
During his time at Huobi Russia, Grachev met Zac Zou, the regional marketing director for cryptocurrency exchange OKEx (now known as OKX). On September 15, Grachev launched a similar cloud-based local exchange, but this time in partnership with OKEx. The exchange is called Jiamix and is also headquartered in Moscow, according to CoinMarketCap. Its website describes it as an “exchange for new opportunities,” while marketing copy says it will shake up the cryptocurrency world. An OKX spokesperson recently told The Block that Jiamix is a brokerage and has never been a part of OKX or its affiliates.
The exchange will close in two years.
2020: Darley Technologies founded
In 2020, Digital Wave Finance further expanded into the Korean market and Japanese exchanges.
Around this time, Marco Schweizer called his former IMC colleague Clement Florentin and asked if he would like to collaborate, according to an interview Florentin gave to liquidity network Paradigm last year. Florentin was born on the Ile de Ré, an island off the west coast of France known for its donkeys in pajamas. He was an experienced quantitative trader, though not focused on crypto at the time.
Florentin flew to Switzerland, where the Schwartzes set up what Florentin calls the "Facebook House." It was a chaotic place with dogs running around, where you could pick a bed, find a place to put your laptop, and start coding. One person who visited the house, located south of Zug, said the whole situation could be summed up by the URL for accessing the intranet, which contained the words "Dog House."
“In the beginning, we were all in the same big house, living and working together. It was a little weird,” Florentin said in the interview.
There, they decided that Digital Wave Finance would continue to target spot and futures trading, while Florentin would build his own brand, Darley Technologies, focusing on options trading, specialty derivatives and requests for quotes (RFQs) — a way to get quotes from multiple liquidity providers. Florentin wanted the option to request quotes from third parties and to be able to build his own trading platform.
"That's why we have two brands, but the teams are a little bit similar," he said in the interview, noting that they could be considered sister companies. "For us, we have two names, but we don't look at it that way. We really look at it more as one big family."
2020-2021: Building closer connections
By the end of 2020, Digital Wave Finance had begun to show results.
The HFT firm operates on more than 10 exchanges, including two associated with Grachev: Huobi Russia and Jiamix, according to profit and loss statements seen by The Block. While it largely only sees results on Binance and Huobi’s futures platforms, it brought in more than $1 million in profits in September, the filing shows.
Over time, it built up a sizeable earnings reserve. “The early success gave us $50 million in capital,” said one person familiar with the company’s operations.
Jakub Rehor, co-founder of crypto exchange Lucy Labs, noted on GitHub that Huobi Russia shut down in December and was replaced by an exchange called CDAX, which still provides Huobi’s liquidity in Russia. Grachev later told Foresight News that he sold Huobi Russia back to Huobi for a “substantial profit.”
It was at this time that Grachev’s ties to Digital Wave Finance became closer. Just before Huobi Russia shut down, Grachev founded a Latvian entity called Vroom and launched a website called VRM Trade (the project was also sometimes referred to as Vrooom, according to two other filings).
“We started talking to each other and became friends,” he later said on the Steady Lads podcast. Grachev recalled that, thanks to his connections in China, he helped Digital Wave Finance integrate with other exchanges and received corresponding fees. Through the joint venture, the high-frequency trading company handled token trading on major exchanges, while Grachev was responsible for interacting with the exchanges and trading tokens on other smaller exchanges.
Grachev later described VRM Trade as a “man-made brand” of Digital Wave Finance in an interview with The Block in April 2023. In LinkedIn and in the interview, Grachev said VRM Trade began in 2018, the same year Digital Wave Finance was founded. Its website shows an average daily trading volume of $9 million in 2018, $440 million in 2019, and $1.7 billion in 2020—all of which obviously belonged to Digital Wave Finance, as VRM Trade had only just launched.
However, VRM Trade still has its own blueprint. One of its main strategies is to incubate other trading companies and discover talents. It will offer Digital Wave Finance's low rates on the exchange, plus some funds, and any successful cases will lead to the joint venture providing VRM with 30-49% of the company's shares. "What is the positive result? It's simple. It's profit, nothing else!" the website says.
It’s certainly a lucrative proposition. By now, Digital Wave Finance is operating on more exchanges, and at higher levels across the board. It has VIP 7 tiers on Bitfinex and OKEx, and negative maker fees on at least seven exchanges, according to an internal document seen by The Block. Its trading volume is so high that even with the lowest rates, it pays hundreds of thousands of dollars in fees every day on Huobi, according to a person familiar with its operations.
VRM Trade provides premium access to many cryptocurrency exchanges. Image: VRM Trade.
This tier comes with huge benefits. The highest tier of cryptocurrency exchanges offers the lowest trading fees. For example, HFT firms on Binance receive a market maker fee of -0.002% for placing trades and a market maker fee of 0.0157% for accepting trades. This makes it much cheaper for the firm and anyone using Digital Wave Finance subaccounts to run high-frequency and other trading strategies. In a later interview with WeBlock, Demin (Grachev’s replacement at Huobi Russia and co-founder of VRM Trade) said the firm has already worked with 30 such teams.
VRM Trade appears to be ambitious, as shown in an internal document obtained by The Block. The company outlines VRM Group’s intention to become the most influential unicorn crypto group by investing in the next crypto unicorn company, with its inner circle forming a “decentralized Wall Street.”
The plan is to increase its valuation to $100 million by 2021, with the core goal of becoming the "most influential company that attracts all talents and "rules" the crypto world."
2021: Introducing Black Ocean and Fly Tokens
VRM Trade’s ambition begins with building an ecosystem of financial products, all bundled together around one token.
“The main and unique idea of this project is to meet the growing market demand for fast trading of large amounts of crypto assets,” the project’s pitch said. It said this would allow brokers and institutional players to quickly sell cryptocurrencies worth more than $100,000 without changing the price on the open market.
The project, called “Black Ocean,” consists of an institutional dark pool without any market data and a broker liquidity pool. The core of the plan, the presentation said, is the Fly token, “a critical component of the VRM business.” If users of the exchange hold 1-3 million Fly tokens and use more tokens to pay fees, they will receive discounts.
The project presentation stated that the total number of fly tokens will reach 1.7 billion, and the supply will be distributed to investors, customers, teams and consultants. Strategic partners will receive 5% of the token supply at an 80% discount.
The token went live in January 2021, and Grachev was very optimistic about its prospects. A few months later, he told WeBlock: “It will be implemented throughout the ecosystem and listed on 10-15 exchanges around the world.” He added that he hoped it would be among the top 20 cryptocurrencies by market capitalization on CoinMarketCap by the end of the year.
Grachev’s connections to the exchange while working at Huobi Russia were a key part of the plan. The funding platform lists members of Huobi advisor Shawn Chong’s team, OKEx’s Zou, and Gemini’s director of sales and business development Euguene Ng as advisors. However, a source familiar with the matter expressed doubts that Zou knew he would be included on the list. The pitch also lists Lucy Labs co-founders Rehor and George Chuang as advisors.
The pitch deck lists Black Ocean's advisors and the companies they work for. Image: VRM Trade.
The company also has its own exchange to back it up. An internal document obtained by The Block shows that it refers to CDAX (the exchange that emerged after the dissolution of Huobi Russia) as VRM Trade’s own exchange, alongside Jiamix.
Another internal document explained how Black Ocean’s potential customers would navigate the legal challenges of using cryptocurrencies at the time. The company said customers would go through a “know-your-customer” process and sign an agreement with one of VRM Trade’s entities to gain access to cryptocurrency trading and trading against the U.S. dollar and euro.
“By the way, these customers may trade in other markets, such as crypto/RUB, but RUB withdrawal and deposit features will not be available until a special agreement is signed with a special legal entity (it’s like Bithumb’s scheme, i.e. you can trade with KRW, but if you want to withdraw or deposit won you have to pass additional requirements),” it added.
2021: Performance issues
As of March 14, 2021, VRM Trade has raised $4.3 million for Black Ocean, according to a press release. Investors include venture capital firms NGC Ventures, FBG Capital, and LD Capital. Black Ocean will launch in the second quarter of that year, the press release said.
But in the end nothing went live.
"Nothing real was produced from it. The project lasted for a year and then it was terminated," said a person familiar with the company's operations, adding that "none of the investors were compensated."
The company tried to set up the exchange in a regulated manner and even hired tactical personnel to obtain a license in Gibraltar, but this never came to fruition, the person said. They said that while Russian and South Korean developers did write code, no transactions were ever conducted.
According to a Black Ocean press release in August, VRM Trade said it created a launchpad for “completely risk-free” initial decentralized exchange offerings. The idea is that if the token price doesn’t perform well enough after launch, then investors will get their money back. The press release gives an example where the token doubled in price after launch, but the token performance was unacceptable and investors were refunded in order to “keep the community profitable.”
The project claims that the token launch is designed to be “risk-free.” Image: Black Ocean.
According to internal messages obtained by The Block, Grachev said that from January 2022, new projects launched need to agree on five conditions, including that the token price must increase three times after listing. If not, VRM Trade will not send the raised funds to the project. Another condition is that VRM Trade needs to clearly understand "how the project will manage liquidity and pumping", and said that he should participate in these discussions.
The press release also noted that the price of Fly tokens increased by 170% over the weekend, and trading volume has also increased. "We expect Fly sales to continue to grow as new partnerships and services enter the market, and this is definitely one to watch in the future," the company said at the time.
A company called VRM Korea later acquired the Fly Token project, which is still under development. The token’s price has been flat since the beginning of 2022, down 99.5% from its all-time high.
2022: The emergence of DWF Lab
By the time the VRM Trade brand was scrapped in June 2022, Demin and Chong had long since left the project, according to a person familiar with the matter. Meanwhile, Grachev set up a Singapore entity for DWF Labs, which would take on the role of the public face of Digital Wave Finance. Grachev, Schweizers and Rendchen were the initial shareholders.
According to an archived version of the Russian version of his website, Demin deleted the text in the biography on his personal website that stated he was chairman of the VRM board sometime between July and October.
In September, DWF Labs officially launched. This marked the beginning of a more active approach to the cryptocurrency market, which ultimately led to a rapid increase in trading traffic and public attention. A person familiar with its operations said that DWF Labs has a large number of sales representatives whose goal is to bring in business, while two sister companies do a lot of trading work behind the scenes.
“DWF stands for Digital Wave Finance. We represent the new wave of Web3 venture capital. DWF Labs strives to align its clients’ business goals with theirs to help them get the best listing price, raise capital, and create markets for their tokens,” Grachev said at the time.
Andrei Grachev at work in the early days of DWF Labs’ office. Image credit: Andrei Grachev, via X.
DWF Labs soon expanded to Seoul, South Korea, where it was run by former FTX advisor Harvey Kim. In documents prepared for potential clients, the trading firm then listed South Korean exchanges including Upbit, Bithumb and Coinone as supported venues. Currently, foreign entities are prohibited from trading in South Korea, and arbitrage is restricted, resulting in high volatility in the South Korean market. Despite these challenges, DWF Labs is still focused on working with projects listed on South Korean exchanges, according to one potential client.
Grachev later claimed that this was done in compliance. “For example, we support our portfolio companies in the Korean market. This is very tricky for everyone, but we are able to do it correctly and in a compliant way. Creative, non-judgmental – this is our philosophy. High standards of service are good for the entire industry,” he said at X.
More broadly, Grachev appeared to have developed an interest in Asian trading. While poking fun at the SEC on Twitter, he later posted that Asian exchanges have more users and higher volumes, and are “much easier to regulate.”
A year later, Kim left the company.
2022: Darley’s Florentin takes stake in DWF Labs
According to company records, Darley Technologies established a Swiss entity in 2021 with a start-up capital of 30 bitcoins (then the price of bitcoin was about $60,000), and appointed Marco Schweizer and Rendchen as founding shareholders. A person familiar with the matter revealed that Marco Schweizer had intended to invest about $1 million in Darley Technologies to pay the company's early salaries.
In October 2022, Florentin became chairman of the board of directors of Darley Technologies, with the Schweizer brothers also on the board, while Rendchen's name was removed.
"I have never held any operating role in DWF Labs since leaving in 2022 and have no interest in the entity. Since I left the board of directors of Digital Wave Finance AG or Darley Technologies in 2022, I no longer hold an operating role in these entities," Rendchen told The Block.
Florentin joined DWF Labs as a shareholder in its Singapore entity in December last year, according to company records. His LinkedIn profile previously stated that he had been an advisor to DWF Labs since its launch, but that information was deleted sometime in the past few months, according to screenshots seen by The Block.
Until recently, Darley Technologies’ website listed DWF Labs as a liquidity provider. Image: Darley Technologies.
Darley Technologies’ website still lists DWF Labs as a liquidity provider, although the page mentioning this was recently removed from its website.
Grachev later told Foresight News that around this time, DWF Labs was one of FTX’s creditors and was holding its funds when the exchange was dissolved. Court records also show that Digital Wave Finance is the owner of FTX B shares, which were originally issued during FTX’s two Series B rounds in 2021.
2023: DWF Labs attracts additional shareholders
Zou (formerly of OKEx), Heng Yu Lee and Ng (formerly of Gemini) also became shareholders of the DWF Labs Singapore entity in January 2023. According to his LinkedIn profile, Lee has been a partner at DWF Labs since May 2022, while Ng, according to his profile, has been a founding partner and advisor to DWF Labs since 2021. Both previously served as advisors to VRM Trade, and Zou joined its team after leaving OKEx, according to people familiar with the matter.
Ng is currently the co-founder of OpenEden, whose funds are managed by a registered fund management company regulated by the Monetary Authority of Singapore and in partnership with Zodia Custary, the cryptocurrency arm of Standard Chartered Bank. Darley Labs, the investment arm of Darley Technologies, is also an investor in OpenEden, according to the OpenEden website.
During that time, DWF Labs operated in Switzerland, Singapore, the British Virgin Islands, Hong Kong, Dubai (where it obtained a free-zone license from the Dubai Multi Commodities Centre Authority), and South Korea, according to promotional materials. Trading was often conducted through its British Virgin Islands or Singapore entities, according to documents seen by The Block and a person with direct knowledge of the company’s operations. The BVI was favored because DWF Labs is not licensed by the Monetary Authority of Singapore, the city-state’s market regulator, the person said.
In February, Sylvain Barbezange, then head of over-the-counter trading at Darley Technologies, moved to Digital Wave Finance as head of institutions, according to his LinkedIn profile.
2023: Stepping into the spotlight
From this moment on, DWF Labs truly entered the public eye for the first time.
While the firm made several deals at the end of 2022, the frequency of deals increased in March 2023. According to The Block’s Deals Dashboard, DWF Labs made seven investments in Conflux, Orbs, Synthetix, Radix, and Fetch.AI.
In April, it raised $10 million for a project called CryptoGPT, which was later renamed LayerAI, a decision that raised questions in the cryptocurrency community about the details of these investments. That month, reports from The Block and CoinDesk further shed light on the way these investments were made, showing that they were often made in over-the-counter transactions, in batches every day over a month or several months.
The Block would later provide more details on how these transactions were conducted and show insights into how the company communicated with clients, including a propensity to talk to clients and prospects about price management. At one point, Grachev asked a client how high he wanted the price of his token to go and discussed whether the company could achieve that goal.
DWF Labs has not been intimidated by the spotlight all year. It has struck bigger deals, finding $45 million to buy EOS tokens from the EOS Network Foundation and $50 million to buy ALGO from the Algorand Foundation. The Algorand Foundation previously said there was no talk of changing markets or providing artificial volume in its dealings with DWF Labs. The Block has not reviewed documents or received information indicating that any of the cryptocurrency projects mentioned in this article had conversations with DWF Labs about price management.
Andrei Grachev participates in a panel discussion at an event organized by OKX. Image: DWF Labs, via X.
After facing criticism, DWF Labs reworked its strategy. It asked clients to start referring to such deals as “strategic partnerships” rather than “investments,” according to DL News. Deals involving split purchases will be announced after the deal is completed, rather than at the outset, according to BlockBeats.
Grachev posted on X that the company has applied for a virtual asset service provider license in the British Virgin Islands and is in the process of obtaining multiple licenses overall. The company is also being audited by a Big Four accounting firm, he said.
Looking ahead, the company is launching a first-of-its-kind incubation program for cryptocurrency companies and plans to create what Grachev called a compliant market for over-the-counter trading of cryptocurrencies, echoing earlier plans by Black Ocean.
With the financial backing of Digital Wave Finance and the connections built along the way, DWF Labs is well positioned to become a major force in the cryptocurrency space in the near future.
If this is true, DWF Labs will be able to break away from the shadow of the past and rebuild a new blueprint.