by Evan Sixtin
The Matchpool ICO raised 125,000 ETH or about $5.5 million in less than two days, but immediately after the conclusion of the crowdsale, co-founder Philip Saunders announced in a Matchpool Slack channel that he was leaving the project and alluded to the implication of an exit scam by the CEO, Yonatan Ben Shimon.
In reply, Ben Shimon posted a Medium article with the BTC address and the ETH address holding the entire funds from the crowdsale. The Medium article reveals the bitcoin and ether addresses containing all the funds from the ICO and explains the conflict between Saunders and Ben Shimon. It also links to an article by another team member, Max Richardson, posted on April 3 just as the Matchpool crowdsale was winding down, explaining that they were in the process of moving funds from ETH to BTC with screenshots of the transactions. This was posted two days before Saunders posted his messages in the Matchpool Slack. So all funds have been accounted for and are visible to investors. (Note: as of April 11, 185 BTC has been moved out of the above bitcoin address and we assume it’s been withdrawn into USD to pay for contractual obligations which were announced in an April 11 post from Matchpool, please see below.)
Now let’s rewind to one week before the ICO on March 26. The Matchpool ICO was originally planned for March 26, but on March 25 it was suddenly postponed to April 2. The reason stated was to allow time for a review and a bug bounty on the smart contract software for the GUP token which would be used in the ICO. The last minute postponement was peculiar, it was fairly obvious something happened which made it necessary to postpone, but nothing specific was revealed.
Although it wasn’t stated at the time, we know now that Ben Shimon had the ICO smart contract software reviewed by the Parity team, and they found several mistakes which could have led to costly losses of ICO funds. Ben Shimon explains this in the section of his Medium post entitled, “Philip’s drama:”
“As we approached the ICO, Philip’s job was supposed to be writing the ICO smart contract code. After Philip had finished his work, we transferred it to Parity for code review. We were then told by them that the code was not “Auditable” contains severe mistakes, written in poor quality and should be written all over again from scratch. And so we ended up hiring guys from Parity to rewrite the contract and then we moved it for further checks to Zeppelin.”
The Zeppelin review of Parity’s code can be seen here. It is understandable why the Matchpool team did not reveal what was going on to the public because it would have surely meant sudden death for the Matchpool ICO, or at the least, would have set it back many months. It does seem important to note that the right thing was done to ensure the security of the smart contract code and be 100 percent positive that investors’ funds would be safe, although it was done last minute. Why it wasn’t known until last minute that the GUP token contract was buggy is still yet to be revealed, but it seems apparent that there was a communication lapse between Saunders, Ben Shimon, and the rest of the team.
So fast forward again to just after the ICO. This period is when things must have come to a head between Saunders and Ben Shimon. From Ben Shimon’s Medium post:
“Soon after the ICO was finished, Philip approached me asked for a share of the total ICO funds. When I told him that such payment is subject to a full-time position as a Matchpool developer and informed him about our intention to recruit additional developers, he reacted the way he did.”
So Ben Shimon and the rest of the Matchpool team demoted Saunders because he allegedly failed at writing a proper smart contract for the GUP token ICO. They must have felt that the responsibility for having to hire the Parity team to rewrite the whole contract from scratch should be on Saunder’s shoulders. In fact, this was a failure of the whole team by not maintaining checks on each other’s work. It can also be possible that the Parity developers could have been dishonest about the errors in the contract code to gain a fee for rewriting it, although this seems unlikely.
It should be noted that in a second Slack message Saunders claimed, “I don’t want to sabotage a working project. The fact it was not working. It was clearly being run by a technically incompetent opportunist.”
The problem with that statement is that there was absolutely no hint that the project was not working in any of Saunder’s posts before that. He had consistently been helpful and supportive of the Matchpool project. He answered investors’ questions and never revealed any doubts about the project until after the ICO. You would think that if Matchpool were not working, he would have said something before the ICO, rather than after if his true concern was to protect investors.
Another interesting disparity is that Saunders claims, “I created Matchpool” while Ben Shimon says, “At the very beginning, I met with both Philip and Max and offered them to join me in the attempt to create our platform Matchpool.” Someone is clearly lying.
On April 11, as an answer to investors screaming “Scam!”, Matchpool posted a new Medium article which includes an annual budget forecast, project expenses, and pre-announces their intention to cash out $500,000 worth of bitcoin into USD to pay contractual obligations including service providers, in-house expenses, and deferred team compensation and salaries, and to fund further development for the next five months. The remaining 1,000+ bitcoins and 87,581 ether will be held in BTC and ETH multisig wallets and remain untouched for the time being.
Most importantly, the new Medium post also offers to any investor who has lost confidence in the project and wants a way out the option to resell their GUP tokens back into ETH for the same price they bought it. The buyer of the GUP will be Matchpool’s largest contributor, Alphabit Digital Currency Fund.
“…if there is anyone who participated in the crowdfunding who still wishes to return their GUP tokens for their initial ETH contribution we have got a solution for you.”
“The resale option is offered to any contributor wishing to resell their entire contribution and must be put into effect by April 22 at the original crowdfunding ETH price. After all, requests will be made, Alphabit will buy the tokens as soon as they will be transferable and will be transferred to them on April 30.”
Although things could have been handled better by the Matchpool team prior to the ICO, the way that they have met with this challenge and handled the mess they made is acceptable. Those who want to stay with the project can, and those who want a refund can get their money back by following the below instructions:
As of April 11, there have been some complaints from investors that after emailing Alphabit for the resale option, there was no reply back. There has also not been any direct communication from Alphabit about the resale option. If the GUP exchange price sinks below the ICO price when tokens become transferable, it seems unlikely that Alphabit would buy tokens at a higher price if they can get them at the lower price from an exchange. Ben Shimon has guaranteed that Alphabit will make good on their offer to buy back investors’ GUP at the ICO price. So we will have to wait and see what happens.
Matchpool, like several other projects in the crypto space, including Bitcoin and Ethereum, is subject to human failures of communication and consensus as a result of human character flaws and personal disagreements; this slows down, and sometimes halts indefinitely, the progress that we all want.
One suggestion from this author to streamline and legitimate the ICO process might be for all these blockchain projects holding ICOs to use the blockchain to track all the funds they spend even after it has been converted to fiat. Just like we want government agencies to use blockchains to make governments more transparent, crypto projects which raise funds with crowdsales should be subject to the same ideal. We have yet to see a blockchain project that has used a blockchain to keep account of its spending.