LONDON (Bywire News) - The EOS Network Foundation’s (ENF) announcement that it was investigating what legal action it could take against B1 sounded a shocked gasp throughout the EOS community. Questions have been raised about whether the ENF will follow through with this threat, if they have a case, and if the ENF has a legal or moral right to even be taking such actions. Even if they do, is this the most prudent course of action – given how familiar B1 is with corporate litigation, while possessing arguably one of the most robust legal teams in the sector?
The ENF has provided Bywire with an exclusive statement. This information from Yves La Rose is about why the ENF is taking this action and what it hopes to achieve.
“The ENF is empowered by block producers to advocate on behalf of the EOS network and its participants,” he explains. “Block.one’s broken promises affected all network participants. With this in mind, we believe the ENF has the moral authority to pursue an investigation on the network’s behalf into the extent of the harm it has experienced and to do a fulsome review of how wrongs can be righted.”
At the end of last week, La Rose announced their decision in a Tweet. Few actual details of what the legal action might entail have emerged but what we do know is that they have commissioned a top Canadian law firm to look at all viable legal options. There has been no confirmation of which firm they have employed, however, Bywire can exclusively reveal that we believe the law firm in question is a top law firm that shares the same registered corporate address as the ENF. The ENF is located at 9th Avenue Calgary, as is Miller Thomson. Self-described as ‘Canada’s Law Firm’, they have vast experience in corporate law with twelve branches throughout Canada. Additionally, the firm was given the go ahead by Nova Scotia's supreme court to represent the 115,000 former customers of QuadrigaCX exchange, who are seeking to recoup the $196 million the exchange owes them. When approached for comment and confirmation, the ENF did not deny that this is the firm they have engaged.
The $4 billion Token Sale
The biggest grudge for the EOS community has always been the $4bn EOS token sale which was, at the time, the largest amount ever raised from a token sale. This came with clear promises and assurances from B1 that they would build and maintain EOSIO and contribute to the success of the ecosystem by investing over $1 billion into projects using EOSIO/EOS. These promises seemed to remain unfilled, then EOS flatlined, while other crypto markets surged.
However, according to La Rose, this is about much more than just the token sale.
“The facts of the situation are that Block.one made representations that it would invest in the EOS network and EOS community members took action based on their belief in those promises,” he says. “This issue extends well beyond the initial token offering. On the basis of Block.one’s messages, people invested their own resources in building the network and, when Block.one failed to follow through, those investments were wasted.”
The token sale was raised thanks to a blitz of marketing, hype, and momentum which pumped up the price of EOS. However, soon after, marketing and promotions started to diminish. B1 turned its attention to building up a private company and expanding its locations. Their argument was that a strong B1 would lead to a strong EOS, but this never materialised. Rather, the direct opposite has occurred. Broken promises followed broken promises, including the lavish launch of Voice.com.
Billed as a killer social media app, which was promised to be built on the EOS blockchain, Voice.com was supposed to benefit EOS token holders, only for it to be built on a private blockchain. In fact, at Bywire, we spent months posting unique content to Voice.com, seeding the platform itself, entering interesting debates and doing all we could to assist this $400 million corporation fulfil its promises to the community. What did Bywire get in return? A notepad file with our articles, and a tweet from the Voice CEO stating that they would never delete anyone’s content. Really? Voice.com proceeded to delete everyone’s content.
Anyone can write something in notepad, Bywire had invested a huge amount of time and money in cultivating our followers, building up our Voice reputation, and even providing free debugging and testing of the beta platform. Voice.com pivoted to an Ethereum, fiat NFT thing, now pays mid-range artists and celebrities to seed the platform and hopes it will somehow buy its way into being cool and relevant. A prime example of a corporation squandering hundreds of millions of dollars because they had too much in the first place. That is too much of the same money B1 took from the community, from you and I, during the now infamous token sale.
The message is clear. People got involved with EOS based on the promises made by B1 to provide the necessary ecosystem and environment for the community to flourish. Had they done so, it’s reasonable to say that EOS would be in a much better position than it is today. It’s an opinion you will see shared among many others in the community. Even today, if you look at the news and social media, negative perceptions continue to weigh down sentiment around EOS. The ENF argument is that those who have invested so much of their time and money into EOS have been materially harmed by B1’s failure to come up with the goods.
And boy did they fail. The @EOSIO twitter handle has not even tweeted since Dec 1. Github confirms the total abandonment of EOSIO by B1, with no updates since April 2021. Brendan Blumer, the B1 CEO, along with Bullish, the multibillion-dollar exchange launched by B1, received such a negative backlash from the EOS community they both feel the need to now switch off replies when they tweet. From ‘social as it should be’, to social has been…and gone.
The situation hasn’t been made any easier by the way in which B1 engaged with the EOS community. Time and time again they have passed up the chance to reach a fair and equitable agreement when negotiating with the ENF and Brock Pierce. They also never talk to the community, certainly rarely listen, and refuse every approach for any comment and interview.
It was that arrogance which led to anger in the community, and which prompted Block Producers to take the so-called ‘nuclear option’, ending B1’s EOS token vesting schedule.
Since then, the EOS community has been charting its own course forward with multiple new initiatives, funds, and rebrands, including the taking over of the EOSIO development and maintenance, new VCs, the funding of multiple working groups, blue papers, recognition grants and a renewed sense of purpose. Bit by bit, all the things which B1 promised are being put in place as the EOS community takes its destiny into its own hands.
Even so, many feel that B1 have escaped their commitments to EOS rather lightly.
“We have been disappointed with Block.one’s reaction to our attempts to negotiate a solution following its failure to fulfil its commitments,” La Rose adds. “As a result, we are exploring all possibilities to reach a resolution of this outstanding issue by other means.”
The other question is the scale of the settlement being sought. Reports in the media describing the ENF as seeking $4bn in damages are, he says, inaccurate.
“To be clear, we are not suggesting that Block.one owes the EOS community exactly $4.1B,” he adds. The exact value of any potential claim against Block.one is yet to be determined. The purpose of our announcement is to let EOS community members know that we are aware of their concerns that they were wronged and to gauge the network’s level of interest in pursuing legal recourse, where it may be available.”
Reaction online has been overwhelmingly positive with polls and comments supporting the ENF’s decision to potentially launch legal action. As to whether they really will act, it’s too early to say. This is the network exploring the possibility of standing up to big corporate interests and acknowledging the anger which exists in the community. This is not a regular occurrence in business.
There are some notable exceptions to those in the community who support these moves. Not least the EOS creator himself, Daniel Larimer, who tweeted:
Real #DAOs don’t / can’t file a law suites. @EosNFoundation Real #DAOs focus on what they are Soveryn over, their own blockchain state. Real DAOs don’t have treasury of other tokens/money controlled by other governance systems. #4billionDAO
— Daniel Larimer (@bytemaster7) February 10, 2022
Larimer is clearly frustrated by the moves of the ENF, however, Bywire’s understanding is that the DAO itself would not be filing the lawsuit, it would be the real-world entity, the ENF. Larimer is correct that in being a real-world entity, the ENF is vulnerable itself to legal actions, and therefore the ENF is not a DAO. It is in reality a not-for-profit foundation, that was already well established in the real-world as such. Perhaps the ENF could make this clearer as many have expressed similar sentiment.
The ENF, by considering such moves, are signalling loud and clear to the world that in their opinion, EOS is no longer B1, and B1 is no longer EOS. This could be the single most important message to the EOS community, of which it must heed. The message needs to resonate both within the community, but more crucially, outside of the community and into the wider cryptosphere.
(Writing by Tom Cropper, and Michael O'Sullivan, editing by Michael and Nicola B)