Neon Machine Faces Deep Financial Turmoil Amid Token Collapse and Massive Layoffs

Neon Machine, the game studio behind the once-promising extraction shooter Shrapnel, is reportedly in the throes of severe financial distress, following the near-total collapse of its project token, SHRAP, and a series of aggressive layoffs that have reduced its workforce to a fraction of its former size.

According to multiple sources familiar with the company’s operations, SHRAP has plummeted over 98% from its all-time high, devastating investor confidence and undermining the financial viability of the studio’s ecosystem. Launched with high expectations and backed by prominent investors including Polychain Capital, Neon Machine had raised $20 million in funding during its development phase, promising to deliver a AAA-quality Web3 gaming experience.

However, the rapid decline in SHRAP’s value has triggered a liquidity crisis within the company. Internal documents and supplier testimonies suggest that Neon Machine is now delinquent on millions of dollars owed to vendors and external partners. These unpaid obligations, combined with diminishing token reserves and dwindling revenue streams, have forced the company to undergo multiple waves of layoffs. From a team that once boasted over 100 employees, only around 12 full-time staff remain as of April 2025.

Founder Sell-Off and Industry Fallout

Sources indicate that several former employees and suppliers are considering legal action to recoup unpaid fees. Meanwhile, community trust has eroded further amid reports that one of the company’s co-founders has been quietly offloading large quantities of SHRAP on secondary markets. While these sales may be within legal bounds, they have contributed to concerns of insider mismanagement and a lack of transparency within the organization.

The collapse of SHRAP also raises broader questions about the sustainability of token-based economies in the Web3 gaming sector. Shrapnel, once marketed as a flagship title showcasing the potential of on-chain gaming, now stands as a cautionary tale. Despite the technical ambition of the project, critics argue that the team may have overextended financially, underestimating the operational costs and player adoption timelines typical for large-scale multiplayer games.

A Wake-Up Call for Web3 Gaming

In the wake of these developments, investors are reevaluating the risk profiles of similar projects in the space. Industry analysts note that while blockchain-based games hold long-term potential, they require stronger financial safeguards, clearer regulatory oversight, and more sustainable tokenomics to survive market volatility.

Neon Machine has not issued a formal public statement regarding the current state of the company or its plans for recovery. As creditors line up and the SHRAP token continues to flounder, the future of both the studio and its flagship title remains uncertain.