Why Did Three Original Members of Bitnation Call It Quits?
While Bitnation was born only few months ago, it has already had more drama than a Venezuelan soap opera. Just before the big crowdsale, three members of the team — Nathan Wosnack, Matt Mckibbin, and David Mondrus — submitted an open letter of resignation.
Founder and CEO Susanne Tarkowski Tempelhof said the decision was prompted by a difference in regulatory mindset.
“First of all, none of them were developers, and second, none of them were particularly core either,” Tempelhof said in an interview with the PanAm Post.
“Their biggest complaint is that the company is not incorporated in a government-backed jurisdiction — naturally, it isn’t, since that’s one of the things we’re offering as a service, incorporation on the blockchain.”
But, what do Wosnack, Mckibbin, and Mondrus have to say about their resignation?
Where do you think the project will go from here?
Matt: I was one of the main spokespeople and communication partners for the project, and not on the technical side, as many news sites have reported. My role was to sell this idea to the public — the idea of an opt-in DIY governance platform. This was a very challenging role, as selling ideas to the intelligent and skeptical minds of bitcoiners often is.
I think the project will ultimately fail to reach its initial crowdsale goal of US$500,000 to $1 million, because investors do not really have a tangible product or understanding of how their money will be spent, or their potential for ROI. The crowdsale was launched, and the sales module has not really worked as intended.
The sales module indicates slightly over 2 million has been issued. Doing the math that each bitcoin purchases 7,256 XBNX (Bitnation cryptocurrency called “crypto equity”), the module is claiming over 276 bitcoins have been invested. When using the block explorer, it can be shown that at the time of me writing this, 13.32 Btc. has been raised. This raises serious issues as to whether investors will get the proper amount of XBNX with their bitcoin.
David: I’m sure she will find other volunteers to take our place. She has full control, as you can see, so it’s up to her now.
Nathan: In interviews, Susanne seems to be referring to the CoinTelegraph article from October 13, 2014, which named David Mondrus, Matt McKibbin, and I as part of the “Core Dev Team.” While we were not developers, per se, certainly there were times David and I took the reign as system administrators with Bitnation, working with the developers directly, and assisting in ways outside of our scope.
For her to say we were not core to the business is a factually false statement, since she wouldn’t have any operational website, nor someone to program the vennd vending machine, nor a new hosting provider, without our involvement. I was also the head of the Communications team as CCO. I got her mentioned on the Wall Street Journal and RT News with Max Keiser through my efforts, and efforts of other members, as well as motivating the ambassadors team in various ways when faced with a clear lack of management direction.
After we left, so did most of her supporters on the Skype group, along with the entire team, and most of the ambassadors, as well as potential investors. Not core to the team? I beg to differ.
You say the initiative is disorganized. What would you have done differently?
Matt: The project had no corporate structure — either registered with a government or registered on the blockchain. The project would have been appealing to private investors had the white paper, development plan, and business plan been finished and reviewed prior to the crowdsale. Investor recourse and a concrete plan for the use of funds are needed for large-scale investors to be comfortable in any project. When problems with the sales module became evident, I would have delayed the start and ensured rigorous testing and security features, such as multisignature wallets. Ethereum did the same thing, and they raised upwards of $15 million.
David: She should have created a real corporation, contracts with the volunteers, and above all, true transparency and distributed control of funds.
Nathan: I would have looked to raise private funding first, after having a properly articulated white paper and business plan, and full financials with proper projections. Then I would have taken most of the money raised and actually paid staff members with contracts instead of volunteers to help realize my dream with Bitnation. I’d also show some proof of concept code with my white paper, showing that some of the development was done (i.e. with land claims, marriage, etc), instead of just bootstrapping on everyone else’s work, and give a longer period of time for a peer-review of the white paper.
When there were serious foundation issues arising before the crowdsale, as happened with Bitnation, I would have delayed it for as long as necessary, as Ethereum did. They managed to raise around $15 million.
What is the legal issue with the crowdsale?
Matt: As I mentioned before, no clear governance structure was indicated either in a corporation or on contracts implemented on the blockchain. Issuing securities without voting rights can be considered illegal by statutes in many jurisdictions. No dispute resolution services were in place prior to the sale. No US IP block was instituted, nor were any KYC filters implemented. Saying “this sale is not intended for US customers” does not fulfill legal obligations.
David: In the United States, there are significant legal challenges to having a crowdsale. Specifically, just soliciting any non-accredited investor is against US law. While Susanne likes to think that because she’s not a US person she’s above that law, unfortunately history proves otherwise. In addition, any employees/contractors/volunteers who are based in the United States or Western Europe are also at risk of prosecution due to “conspiracy” and “attempt” laws.
Nathan: A lack of a corporate legal structure in place. I know I’ve received criticism from the CEO for this with ad hominem attacks, alluding to my support of a corporate legal structure as being “libertarian” and thus “statist.”
But in my opinion, making vague, grandiose statements that the contracts and resolutions being done “on the blockchain” shows a clear lack of responsibility and understanding of how a blockchain actually works, and how contract law works. In my opinion, making claims such as the contracts and resolutions will be “on the blockchain,” and simultaneously that they will be governed by British Common Law, makes absolutely no sense to me.
This business model seems to appeal to naive and uninformed people looking outward-in, perhaps anarchists. Some have pointed out to me and the community that Bitnation is essentially committing affinity fraud.
No dispute resolution in place, with no clearly outlined terms for this.
I was informed the only lawyer for Bitnation is the CEO’s husband, so this is a clear conflict of interest for staff and investors.
Bitnation claims to offer crypto equity, but there is a lack of voting rights, therefore some would argue Bitnation is offering unregistered securities and is in violation of various securities statutes. Claim all you want in terms of jurisdictional limitations, but I can’t see this stopping governments from enforcing extraditions to the executives or anyone volunteering at Bitnation.
Bitnation claims to be transparent, yet it lacks a business plan and fully disclosed financial projections.
Bitnation has one signing authority, and that is the CEO. On the record, the CEO made claims that Bitnation was utilizing Multisig, but it is obvious this isn’t the case to anyone looking at the wallet on the site. The lack of a serious vetting process for people managing the website and their core infrastructure opens Bitnation up to major vulnerabilities and the opportunity to be exploited by criminal elements.
Why did you quit the project now? Why not earlier?
Matt: I resigned from my position because I did not see the proper organization or legal structure in place to make this project viable. As a public spokesperson for the project, I felt a moral obligation to warn potential investors on the issues I had observed. My concerns were more about the idealistic people in developing nations, envisioning this project could help them, and investing money they could not afford to lose in something that would never actually reach them.
David: We tried desperately to change her mind until the last minute. We love the project. We didn’t want to sabotage it. But when the rumor spread that action from US enforcement and allies was imminent, we could no longer take part and put ourselves at risk.
Nathan: For the lengthy reasons listed above, plus a lack of concern the CEO has had for the project’s staff. Berating staff and volunteers on semi-public chat rooms is unprofessional and inexcusable.