CLOUD-006: Should Sanctum sell 13.7m CLOUD from the CLOUD community reserve to Defiance Capital?

[fplee]

(The proposal was raised by Defiance Capital: I am posting on their behalf)
(CLOUD-6 - DeFiance Capital - CLOUD Token Acquisition Proposal | Sanctum)

DeFiance Capital - CLOUD Token Acquisition Proposal

TLDR

DeFiance Capital proposes to purchase 5% (13.7m CLOUD) of the CLOUD community reserve tokens. As a long-term strategic partner since 2021, we aim to deepen our commitment to Sanctum while continuing to provide strategic value through our extensive network in both crypto and TradFi sectors.

Summary

This proposal outlines DeFiance Capital’s intention to purchase CLOUD tokens directly from the Sanctum community reserve. Our multi-year partnership has consistently delivered value through capital deployment, strategic introductions, and ecosystem development. This acquisition represents a natural progression of our relationship and aligns our interests further with the Sanctum community’s long-term success.

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Proposal

About DeFiance Capital

Founded by Arthur Cheong (@Arthur_0x), DeFiance Capital is a prominent crypto investment firm with a strong footprint globally. The firm specializes in liquid token investments with high growth potential, driven by a thesis-based, fundamentally grounded approach. Our investment philosophy centers on identifying and supporting projects that demonstrate strong fundamentals, innovative technology, and the potential for significant ecosystem impact - with Sanctum being a key example.

Background & Partnership History

DeFiance Capital and Sanctum have maintained a strong strategic partnership since 2021. Our relationship began with our initial investment in Sanctum, where we not only provided capital but also leveraged our network to connect the team with other major funds, helping to establish Sanctum’s position in the ecosystem.

On-going Contributions

Our commitment to Sanctum’s growth has continued to evolve:

• LST Partnership Development: We facilitated key introductions between Sanctum and various Solana DATs (Digital Asset Treasuries), enabling strategic LST (Liquid Staking Token) partnerships that expanded Sanctum’s ecosystem presence.

• Market Exposure: We actively encouraged the team to present CLOUD at industry events and worked collaboratively to refine their pitch, increasing exposure to liquid funds and institutional investors.

• Strategic Advisory: Ongoing guidance on positioning and growth strategy within the rapidly evolving Solana ecosystem.

Future Value Addition

DeFiance Capital commits to the following ongoing support:

1. Institutional Promotion: Active promotion of Sanctum’s products to our extensive network of crypto funds and traditional finance institutions, opening new channels for adoption and liquidity.

2. DAT Integration: Facilitate seamless integration with all major DATs, ensuring Sanctum maintains its competitive edge in the liquid staking landscape.

3. Strategic Advisory: Continue providing strategic guidance on product development, partnerships, and market positioning.

We seek to acquire CLOUD tokens and ensure that the community reserve gains funds that can be strategically deployed in the future.

Operations Details

Acquisition Terms

• Amount: 13.7M CLOUD (5% of of Community Reserve supply)

• Price: $0.12; This is the 30-day TWAP price of CLOUD when we initially submitted the proposal to the Sanctum team

• Payment Currency: USDC

• Payment to: Sanctum Community Reserve

Use of Proceeds

The cash raised from this token sale will be transferred to the Sanctum’s Community Reserve. This injection of resources will enable Sanctum to accelerate ecosystem development and strengthen its operational capabilities.

Transparency & Governance

• All transactions will be executed fully on-chain

• Complete transparency of token acquisition and holdings

• Adherence to all governance processes established by Sanctum

Execution Timeline

Upon approval, the acquisition will proceed according to the community’s governance timeline with all relevant transaction details made publicly available.

Conclusion

This proposal represents a natural deepening of a partnership that has already proven mutually beneficial over multiple years. DeFiance Capital’s acquisition of community reserve CLOUD aligns our incentives with the community while ensuring we continue to provide maximum strategic value to Sanctum’s growth and success.

We look forward to the community’s feedback and approval of this proposal.

[fplee]

Note from FP: In a first, this proposal is going directly to voting rather than having our standard 1 week deliberation period. The reason is that these sort of proposals are time-sensitive and can be front-run. In the case where a desire to buy tokens goes to a lengthy deliberation period, the market price will move against it, which is not fair to the proposer. This is our first time running a proposed OTC sale of CLOUD, and we are learning from how MetaDAO is doing it (they have done it many times before), with no pre-deliberation period.

We had originally wanted to lengthen the voting period to compensate, but MetaDAO tells me that upon DAO initialisation the choice of trading period is set. So unfortunately we can’t do that. MetaDAO tells me however that in practice, lengthening trading duration is largely irrelevant.

See you in the markets!

[giancarloangulo]

higher and continuous alignment with one of the institutional partners is important for both sides of a relationship.

something that would swing the vote for me would be can Defiance Capital disclose the current range of their Cloud holdings.

this is a go for me depending on how high the amount of cloud Defiance Capital owns.

[pbear]

Hi.
I didn’t have time to make a proper review of this proposal due to unexpected timing. I only did a quick review — and I don’t like it at all. It’s a no from me.

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I always believed that the community fund would eventually need to sell tokens — that’s healthy. It’s good for the fund to hold some USDC.
But not through an unexpected futarchy vote without any deliberation period.

If it’s truly a community fund, Defiance must follow the existing rules.
Why should we give them special treatment and be rushed into a vote considering the frontrun risk?
We should first think about Sanctum and the community itself and later about any VC.
We survived without paying CEXs, and we’re strong today.
We can move forward without selling to VCs as well.

We are betraying our own principles by ignoring the previously established voting process.
That’s very disappointing.

If they are afraid of frontrunning — let them buy from the team reserve.
The team should have a much better understanding of whether Defiance truly deserves such terms.
I personally can’t make that judgment — sorry, but this is the first time I’ve heard of them.
I might be wrong and underestimating Defiance’s importance, but I’m just being honest with myself and trying to weigh all the pros and cons within the limited time I have.
I’m fine with any decision made by the team, but when it comes to the community, we must follow the rules.

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Why do VCs always want to buy at a discount?
Why don’t they accumulate on-chain?

If there isn’t much liquidity left in the market and people don’t want to sell — why should we satisfy the appetites of VCs?
They had plenty of time to accumulate at $0.07.

If they’re truly long-term aligned, they could’ve done it when the market looked bad.
Now, when things are finally looking better — this proposal appears.

PS - Don’t know to be honest if they did accumulate at $0,07 or not. Let them comment on this.

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Do we even need that cash now, given that Sanctum is already generating revenue?
It’s $1.6 million USDC — what are we going to do with it?

If we can’t even make consistent governance decisions right now, that money will likely just sit idle until the next vote — maybe to buy tokens from Defiance at $0.30 (joke)?
That makes little sense to me now. I think we could have better deal for community fund.

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The Sanctum community would benefit more if we allocated these tokens into a DLMM position with a price range between $0.14–$0.20.
That would allow any market participant to buy Cloud tokens — not just Defiance.

If Defiance wants to buy — let them buy on the market.
They already had an extremely good opportunity to accumulate at $0.07 (mentioned before).

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We should also ask ourselves:
Why is Defiance not buying tokens directly from the Sanctum team?

How can we decide, with less than three days, how “important” Defiance is — to justify giving them such favorable terms (Cloud at $0.12)?

What if other market participants also want to buy Cloud but simply don’t create proposals to make their lives easier?

Defiance should negotiate with the team for token sales — not the community fund.
We cannot decide, with such limited information and time, whether their achievements are significant enough to justify special treatment.

Conclusion:

Everything in this proposal ultimately comes down to how important Defiance is to us and how far we’re willing to go to accommodate them.
However, since I personally can’t make that assessment — and I believe only the team has enough context to do so — it would be more reasonable for the team, rather than the community, to make such decisions.

[Luk4]

So technically what this will mean, if the vote passes, is that we take 13.7M CLOUD from the Community Reserve thus making it 293.3M CLOUD plus the Community Reserve will now contain 1.644M USDC, correct?

Does the Community Reserve contain any USDC today? I believe that we will need to start tracking USDC in the Community Reserve somewhere, and ideally make it part of Sanctum Quarterly.

Thanks,

L.

[madders]

I guess my only questions here are:

1. What is the vesting term for this sale?

2. Why couldn’t they buy from open market?

[fplee]

1. There is no vesting term.
2. They might already have bought from the open market. This is a proposal to potentially acquire more CLOUD.

[amensch]

Technically, there is nothing stopping them from acquiring the tokens and then selling on the open market capturing profits immediately, and probably lowering token price and hurting current $Cloud holders?

I am all for this proposal if there was a lock up period to give the market opportunity to adjust to the deal. Also, allowing us to decide if we want to dump or hold as well. Logically Investment Companies take profits immediately and not care about anything else.

[fplee]

@amensch

Technically, there is nothing stopping them from acquiring the tokens and then selling on the open market capturing profits immediately, and probably lowering token price and hurting current $Cloud holders?

Technically yes. But this would be a clear breach of trust and it would ruin their reputation completely. No team would ever want to deal with them for any OTC deal ever again. Not worth the reputational hit to make ~$410k on a 8 digit (I’m guessing) fund.

[amensch]

Granted.

Im willing to take the chance. Maybe this will be the first of many institutional Invesments. Hopefully this is a sign of something big cooking over there. Ill vote YES

[apka]

Initially this proposal felt questionable. A large token sale to a single institution, pushed through on an expedited timeline.

But the core question I keep coming back to is: what outcome creates more buy-pressure and long-term alignment for $CLOUD?

Holding 13.7 M CLOUD idle in the community reserve doesn’t actively grow the ecosystem. Converting a portion into USDC and forming a deeper alliance with DeFiance Capital can. The Sanctum team has been deliberate in its partnerships since the beginning, and I trust that this proposal reflects that same caution and intent.

The obvious concerns; no vesting, discounted price, and a shortened deliberation window are valid. They should be documented and monitored. But reputationally, it would make little sense for DeFiance to dump tokens; and strategically, giving them more exposure to CLOUD aligns incentives with long-term ecosystem success.

Having deployable stablecoins in the community reserve also improves optionality. Even if we later use those funds to buy back CLOUD at a higher price, that’s still net-positive. It creates demand.

My stance: support the sale, but pair it with transparency. If the proposal passes, the community should expect a clear report on (1) how the USDC is deployed and (2) how DeFiance contributes beyond capital: introductions, integrations, liquidity, etc. That accountability ensures this isn’t just a token transfer, but a strategic move to strengthen the CLOUD economy.

[NYSoul]

TY FP for posting this and TY DeFiance for supporting Sanctum!

My only question: FP, what would you do with the $1.644m raise? Is it needed?

[DoubleU]

Who thought that selling below market price is a good idea?

Tokens are sold at a premium when brought in bulk, potatoes can be bought in bulk at a better price per kilogram though…(Not tokens though)

I think it is unfortunate that we use the average price of the last month, I am not in favor, maybe I am not well informed, but i think the reason they won’t market buy is that they can’t get this price on the market due to liquidity limitations. If that’s the case which I am pretty sure it is why give away that much tokens at such a discount.

Maybe it is time to talk again about the liquidity of the token if institutions want to start buying

[NYSoul]

It was based on TWAP at the time of discussion. Just happened that we moved up after discussion. Kind of similar to wen $META voted for VCs to add to their shares.

[DoubleU]

I don’t see why someone would get a better deal considering he won’t be able to buy these amounts without moving the price upwards. At least should pay a premium. They wanna buy in on a bad month basically…Not sure if that’s how it works

[DoubleU]

Τhe question is why we use Twap to measure the price and why even though they wouldn’t be able to buy such large amounts of the market there is no premium on top of the price itself.

[Sowetoddid]

IMO it’s a simple “no” vote. Great sign institutions want more. No surprise they want to buy off market in volume. But…

• The team hasn’t claimed to need cash (so no need to raise capital)

• If you believe CLOUD is going much higher, then you’d rather hold CLOUD than swap for stagnant USD

Most bullish scenario is they buy on open market because they can’t get it through this vote.

[nimbusNoob]

I think it’s worth noting here that Defiance Capital was an independent entity under 3AC. Their assets from back then are still tied up in litigation.

There is no guarantee newer assets on their balance sheet would be spared from liquidation if litigation does not go their way.

Though the amount they are attempting to buy from the community reserve is not excessive, I think it’s important to outline this potential risk .

[Aro]

Since you unilaterally decided to end ASR and pause governance like that other solana project I’ve lost interest in web3 governance.

But in this case I think it’s just something potentially good that they’ve executed very badly once again.

Not something I’m particularly against.
Community reserves having USDC would allow the community execute initiatives like the ambassadorial program and whatever else we need to do without having to sell cloud in the future, we don’t know what future market conditions would be like.

Plus sanctum NEEDS to compete, jito is far ahead when it comes to institutional adoption even though sanctum has the superior product. The community should welcome developments that push it forward.

The way they’ve handled it ensures that votes would be reactionary (and most likely no) rather than a logical assessment. And if it passes people would feel it happened against their will.

Let’s start doing things like the quality project sanctum is, not a bunch of tinkerers and potters.

Also the META mentioned in the proposal had their discount OTC deal turned down. Like some of the others I’ve seen recently. Discount OTC deals are not popular.

— Going forward OTC deals you suggest should include significant market buying

Aside: I thought futarchy was “too complex” and you decided to cancel it for a “governance layer” which hasn’t been decided.

(This was written for research but I erroneously posted it on the discord first)

[bozer76]

I appreciate Defiance‘s interest in Cloud. It’s a pro team, competent and committed. I’d vote for it, provided it is close to the market price on that specific day. The proceeds should be used to advance a particular topic, further helping Cloud to become stronger.