Neon Machine, the developer of the web3-enabled extraction shooter Shrapnel, is allegedly facing significant financial challenges. Once expected to become a flagship title in the blockchain gaming space, Shrapnel has encountered delays, budget shortfalls, and repeated layoffs. The game, which combines elements of titles such as Escape from Tarkov and Apex Legends, initially drew attention for its sci-fi setting and gameplay mechanics. However, sources familiar with the company’s operations say the project is now at risk due to a lack of funding and internal instability.

At its peak, Neon Machine employed between 70 and 100 staff members, with additional support from third-party developers such as Sperasoft and IronBelly Studios. Internal documents reviewed by Blockworks and corroborated by sources reveal that by the end of 2024, the workforce had shrunk to just 32 employees, and by early 2025, only around a dozen full-time employees remained. Most of the remaining staff are no longer actively working on the core development of Shrapnel.

Neon Machine Original Team From 2024

About Shrapnel

Shrapnel is not your typical web3 multiplayer game. This first-person extraction shooter features a single operator, a limited selection of weapons, and an unfinished map set in a futuristic Japanese city. The game currently exhibits missing textures on buildings and surfaces, with basic geometric shapes serving as placeholders for future content.

It represents a greybox environment, an early development stage rarely available for public play. However, for Seattle-based developer Neon Machine, this approach is intentional. The goal is to involve the community early in the development process, allowing player feedback to shape both the map and Shrapnel’s extraction gameplay. 

Shrapnel Key Art

Cost Overruns and Debt Accumulation

Documents viewed by Blockworks show that Neon Machine has recorded total operating expenses of nearly $87 million since its founding. In 2024 alone, the company posted a net loss of $11.4 million, with approximately $33 million in spending against $21.7 million in service revenue. Despite attempts to lower its monthly burn rate, sources indicate that it continued to fluctuate between $2 million and $3.5 million per month at its peak.

Sources also suggest that expected funding rounds in early 2025 have not materialized, further exacerbating the company’s financial issues. Employees earning over $100,000 annually were asked to accept temporary salary reductions in early 2025 as part of a cost-saving measure, according to documentation obtained by Blockworks.

Neon Machine declined to disclose specific financial figures but stated it is “in the strongest position” it has been to date and is continuing efforts to raise funds. The company’s CEO, Kenneth Rosman, who joined in December 2024, stated via email that fundraising efforts are ongoing and showing progress.

Shrapnel Coming 2025

Strategic Pivot Toward the Chinese Market

As part of a broader strategy to stabilize the business, Neon Machine has entered into a partnership with Chinese entities to localize and distribute Shrapnel in China. The game will be launched on China’s Trusted Copyright Chain, a blockchain initiative that certifies digital assets and intellectual property under government oversight.

The agreement includes local partners such as ZenHive and Argon, with responsibilities ranging from marketing to tax management. Neon Machine’s role, according to internal documents, will involve coordinating with co-development partners in China and delivering custom game assets tailored to the local market. Despite the partnership, the company maintains that Shrapnel will still launch globally and remain an independent project.

Regulatory requirements in China will necessitate content adjustments, including potential changes to character designs and gameplay mechanics. However, Neon Machine stated that no core gameplay changes are planned, and the localized version will offer exclusive regional content.

Shrapnel Partners with Chinese Government

Token Value Declines and Market Doubts

Shrapnel’s native token, SHRAP, has experienced a substantial decline since its public listing. Initially tracked in November 2023, the token has dropped from a high of approximately $0.43 to around $0.0066. This loss of value, combined with uncertainty about the token’s utility given the game’s integration into China’s blockchain infrastructure, has raised concerns about its long-term viability.

Blockchain data shows that a wallet linked to Shrapnel co-founder Don Norbury has sold more than $670,000 worth of SHRAP since September 2024. These transactions occurred over several months and involved conversions into USDC and AVAX via MetaMask. Norbury, who is listed as the game's chief technology officer, has not responded to requests for comment.

Neon Machine has previously revised the token’s vesting schedule to slow down distribution and align with user growth, but market data suggests that SHRAP remains relatively illiquid, limiting large-scale sales without impacting price.

Shrapnel Token Unlock

Legal Disputes and Settlement

Shrapnel’s development has also been affected by legal issues involving its early investors. A lawsuit filed by 4D Factory in 2023 alleged mismanagement of company funds. That case has now been settled, according to court records and both parties’ legal representatives.

Under the terms of the agreement, Neon Machine will pay 4D $4.25 million over four years and issue 150 million SHRAP tokens, currently valued at approximately $767,500. While the legal dispute has been resolved, the financial burden of the settlement adds another layer of pressure on the already strained company.

Shrapnel Developer Neon Machine Names New CEO

Ongoing Development and Uncertain Future

Despite repeated delays, Neon Machine has stated that Shrapnel will launch as a free-to-play game before the end of 2025. However, several sources with knowledge of the studio’s operations expressed doubts that the game would be completed or released on a global scale within that timeline.

The company has moved out of its Seattle office space and is now operating as a lean organization. While remaining employees and external contractors continue work on the game, the reduced resources and financial instability may limit progress.

Although Neon Machine continues to publicly express confidence in Shrapnel’s launch and potential, the combination of financial losses, token devaluation, workforce reductions, and strategic reliance on international partnerships signals a precarious position for the web3 game once regarded as a leader in the space.

Source: Blockworks