Blockchain Sleuthing Firm Chainalysis Slashes 20% of Workforce

Chainalysis laid off 39 employees Thursday, about 20 percent of its workforce, as the startup prioritizes turning a profit and bringing products to market.

These across-the-board cuts eliminated positions in nearly every corner of the blockchain analysis firm, said Maddie Kennedy, Chainalysis’ director of communications. The research and development team saw the most cuts. The company's total headcount is now 155.

The downsizing will help put the five-year-old Chainalysis on the “path to profitability,” Kennedy said, allowing the company to shift resources into product teams and a go-to-market strategy.

It's one of the largest layoffs in the industry since the so-called crypto winter of 2018 ended and bitcoin's price, a market bellwether, began climbing earlier this year. Circle let go of 30 employees, or 10 percent of its workforce, in May, and more recently Israeli startup Colu fired 13 people, or 30 percent of its staff.

Chainalysis’ mass layoffs follow a string of seemingly positive announcements for the company, which inspects public cryptocurrency data for clues of illicit activity. One of the most well-known such sleuthing services, it is a longtime stalwart in the U.S. government's crypto investigations.

The U.S. Department of Justice used Chainalysis software to take down the world's largest child pornography site last month, leading to hundreds of arrests and the rescue of 23 children.

Last week the firm held its first industry conference in midtown Manhattan; a week prior it unveiled a new crypto data tool for institutional investors; and in April it closed a Series B funding round with $36 million from backers including Accel and Mitsubishi UFJ Financial Group, Japan’s largest bank.

Chainalysis has raised $53.6 million total in the years since Jonathan Levin and Michael Gronager started the company in 2014. And it funneled that capital into an aggressive expansion plan that included a research and development office in London – which will remain open – and more hires.

Alongside former government recruits, including a former Financial Crimes Enforcement Network (FinCEN) official, hired in June, and three executive-level hires earlier this month, Chainalysis boasted more than 25 open positions when it opened Series B in February.

By its own count, over 140 companies (ranging from crypto exchanges to traditional banks) and 20 governments now use Chainalysis products. 

But market conditions necessitated early action, Kennedy said. The layoffs are a preemptive measure, meant to stave off the unexpected, including the possibility of an economic downturn, she said.

“We think that acting now is best for the long-term health of the business,” Kennedy said.