06 Apr Matchpool Denies Co-Founder Claims Its CEO Pulled $1.7 Million Exit Scam
The Blockchain project Matchpool raised over $5.7 mln in 48 hours, with high anticipation from the community on its decentralized matchmaking protocol. However, the community was shocked the next day to discover the company co-founder Philip Saunders’ public accusations that its CEO Yonatan Ben Shimon had pulled an exit scam and disappeared with $1.7 mln of the funds raised.
Similar to most Blockchain projects, Matchpool engaged in an Initial Coin Offering (ICO), a crowdfunding mechanism designed after the Initial Public Offering (IPO) process of conventional companies, to raise millions of dollars.
Essentially, Matchpool sold its local tokens for the Ethereum networks’ Ether, to secure enough capital to fund their operations until Matchpool is ready for commercial use.
Early investors who bought Matchpool’s tokens with Ether become stakeholders of the project, and profit from their investment as the value of Matchpool increases over time.
However, instead of being transparent with the usage of their funds, Matchpool seems to have misdirected their funds by trying to hedge their capital to Bitcoin. According to the co-founder of Matchpool, who resigned after he suspected the likely exit scam, the company’s CEO Shimon took 37,500 ETH, which is equivalent to $1.69 mln at the time of writing, from the firm’s multi-signature wallet account to hedge the Ethers to Bitcoin via Bitcoin Suisse AG.
Bitcoin Suisse not involved
But, as both Shimon and Bitcoin Suisse say, Bitcoin Suisse was not involved in any way with the Matchpool fund controversy so the reputation of a completely unrelated Bitcoin service provider was harmed.
To withdraw funds from a multi-signature wallet, a user must receive confirmation from every private key holder. In other words, if the multi-signature wallet of Matchpool is maintained by its co-founder, CEO, directors, advisors, etc, in order for Shimon to withdraw 37,500 ETH, he would have needed confirmation from every multi-sig private key holder within the company.
So the suspicion grows of a case of fund mishandling and miscommunication from the Matchpool team as they enabled a member of the company to withdraw $1.7 mln of investor money without requesting the member to provide an evidence as to how the funds will be used.
The co-founder of Matchpool stated that upon speaking to Bitcoin Suisse, he was certain that Shimon did not hedge 37,500 ETH to Bitcoin and likely pulled a dreaded exit scam, which the cryptocurrency community fears.
Matchpool co-founder stated:
“Over the last two days, 37,500 ETH has been withdrawn from the multi-sig wallet by the CEO, Yonatan Ben Shimon without any explanation or announcement due to the need for “hedging.” Yonatan keeps claiming he’s working with Bitcoin Suisse and it’s all okay, but so far I haven’t seen any evidence of this. I suggest you all demand an explanation and keep a close watch.”
Various Bitcoin experts including Tuur Demeester and Andreas Antonopoulos criticized Matchpool for this handling of an ICO.
Likely $1.5M ICO exit scam: https://t.co/92RC81DBHx
— Tuur Demeester (@TuurDemeester) April 6, 2017
Matchpool responds to accusations
In responding to Cointelegraph’s questions, Matchpool denied the allegations of its co-founder and accused him of ill intent in order to delay the development and growth of the company.
Matchpool wrote to Cointelegraph:
“There was a miscommunication within the team. The public post from Philip took us all by surprise. Philip [co-founder] decided to try and prevent the success of the project which we had all worked so hard on and we’re not prepared to sacrifice this opportunity. We would have announced this to the community prior to the hedge, however, Ether was extremely volatile and the decision was made quickly in the interest of the project’s future.”
According to Matchpool, the user funds are safely stored in their cold wallet:
“We sold the Ether for Bitcoin to hedge against the volatility of the Ether price. We have the responsibility to build a great project and that is what we are going to do. You can see all the evidence of the cold Trezor wallet here.”
But, the company did not specify how much of the $5.7 mln is stored in their Trezor wallet and if the $1.7 mln withdrawn by its CEO is also stored in the Trezor wallet.
The company informs it has appointed Or Demri to the position of CTO:
“Or specializes in system architecture on Ethereum and is highly qualified for the role and recommended by the community. Or won the Consensys NY EtherCamp Hackathon last year so we’re in a great position now to move onwards and upwards. Or will also inspire other developers in the community to join our future developer platform DevPool. Matchpool offers developers a chance to create custom matchmaking DApplets (Pools) that plug into the protocol where they can earn from matchmaking. With the raised funds, Matchpool is also hiring at matchpool.org.”
Matchpool has also given its answers on the ICO handling.
Cointelegraph: How would you defend the decision to allow full access to accrued funds from the ICO for project leaders?
Matchpool CEO Yonatan Ben Shimon: Some of the funds are held in an ETH multi-sig wallet and some in BTC. The ETH multi-sig doesn’t give full access to the funds and the cold storage was the best viable option. The reason I made this decision was to protect the investor’s fund until the bank account is opened. I’m responsible for delivering the project. The team and community felt I made the right measures in order to protect the funds. When the bank account is opened, all the BTC will be transferred safely.
CT: Were you surprised by the speed of the Crowdfunding (not ICO)? What are your major intentions in terms of investment?
YBS: Yes, I was surprised and very grateful for the response to Matchpool. We are going to publish an article in the coming week about our intentions. We will publish this with a future roadmap and budget.
CT: What steps are you undertaking now?
YBS: We are focusing on new informative creative for the platform. We are opening the bank account and as soon as this is operational and restructuring the team, including the appointment of a new CTO.
YBS: How soon the whole situation will be resolved, according to your estimates?
Within the coming weeks, we are looking to start on the production of the project.
The Cointelegraph team has also tried to reach Steemit CEO Ned Scott who advises Matchpool on the ICO. Unfortunately, Mr. Scott has canceled Thursday afternoon the interview arranged beforehand.
Cointelegraph will get the readers updated about the case development.