Neon Machine’s Shrapnel Faces Financial Turmoil Amid Layoffs and China Partnership
Neon Machine, the gaming studio behind the highly anticipated blockchain-based shooter Shrapnel, is facing serious financial difficulties. Once envisioned as the Call of Duty of the crypto gaming space, the project is now mired in debt, layoffs, and an uncertain future. Sources suggest that Neon Machine has run out of cash and has made a strategic move to partner with the Chinese government in an attempt to stay afloat.
A Promising Start with Lofty Ambitions
Shrapnel made waves in the gaming community with its ambitious promise of a sci-fi shooter blending elements of Escape from Tarkov and Apex Legends. The game was set to feature an optional NFT-based ecosystem, allowing players to engage with in-game assets in new ways. Early previews at the 2023 Game Developers Conference showcased potential, albeit with noticeable bugs and lag issues.
Backed by high-profile investors like Polychain Capital, Griffin Gaming Partners, and Franklin Templeton, Neon Machine secured $20 million in Series A funding in October 2023. At its peak, the company employed up to 100 people, with additional support from external studios such as Sperasoft and IronBelly Studios.
Financial Struggles and Mass Layoffs
Despite its promising beginnings, Shrapnel has been plagued by financial woes. Internal documents reviewed by Blockworks indicate that Neon Machine has burned through $86.9 million since its inception. The studio’s monthly expenses reportedly ranged between $2 million and $3.5 million, far exceeding sustainable levels.
Sources close to the company describe it as a "toxic, failing startup" that failed to develop a clear financial roadmap. Reports suggest that a much-needed funding round, expected to close in early 2025, fell through, leaving the company scrambling for alternative solutions.
By the end of Q1 2024, Neon Machine had 72 employees, with 39 dedicated to Shrapnel. However, subsequent layoffs reduced the workforce drastically, with fewer than 20 people currently working on the game. In March 2025, staff making over $100,000 annually were asked to accept a 20% pay cut, further signaling the company’s financial distress.
Shifting Strategies: A China Partnership
In a surprising turn, Neon Machine announced a strategic partnership with the Chinese government to launch Shrapnel on China’s Real-World Assets (RWA) Trusted Copyright Chain. The company insists this does not equate to selling the game to the government, but rather allows Shrapnel to gain official certification and distribution support within the Chinese market.
The deal reportedly involves collaboration with Chinese entity ZenHive, which will oversee marketing and sales in the region. Internal company documents describe the arrangement as a "For China, By China" strategy, with exclusive content planned for the Chinese market. Shrapnel is expected to launch in China in June 2025, while its global release remains uncertain.
A Rocky Road Ahead
Neon Machine maintains a hopeful stance, with CEO Kenneth Rosman stating, "We’re now in the strongest position we’ve been to date." However, financial projections paint a grim picture. If no additional funding is secured, the company is expected to face a cash deficit of over $13.5 million by the end of 2025.
Despite the company’s reassurances, industry insiders remain skeptical about Shrapnel’s future. With dwindling resources, an incomplete game, and an increasingly skeptical player base, the once-promising title may struggle to meet its ambitious launch goals.
As the gaming world watches closely, one question remains: Can Shrapnel pull off a last-minute turnaround, or is it destined to be another cautionary tale of over-ambition in the crypto gaming space?