Attributes
Author(s):@zaatar
Recipient(s): @zaatar, @RawthiL, @jerry, and (soon-to-be-named) lawyer
Category: Contract
Asking Amount: $10,000
Related Proposals:
This proposal is based on and replaces PEP-67 (P.R.I.S.O.N.).
Summary
Nodes4All, which shut down without warning last October, returned POKT stakes and rewards to some investors but not to all. This proposal calls for investigating why, and then taking steps to recover those funds from Nodes4All (N4A). Counsel will be retained for this purpose.
Problem
N4A continues to drag its feet and leave investorsâ refund pleas unanswered - despite its promises and mediation efforts by PNF.
This is totally unacceptable.
Pocket Reputation at Risk
Ill treatment of our investing public, even if by a private company, threatens the good name of the Pocket Network and can deter investment. If the DAO is seen to stand by idly, Pocketâs reputation will suffer harm.
On the other hand, a proactive approach on behalf of investors who feel wronged will boost Pocketâs profile. New staking investment will be encouraged.
Strong Message Needed
Importantly, the DAO must send a strong message that it will not tolerate any mistreatment of stakers. There needs to be accountability.
The findings of our probe will likely contain learnings for investors and staking services alike. These learnings will inform an upcoming proposal on making staking investment in Pocket as friendly and safe as possible.
Background
Please refer to PEP-67.
Solution
Under this proposal, we will investigate, among other things, N4Aâs claim that it fell victim to theft. Within a fixed time-frame, say, 60 days, we will complete this investigation, including determining who has yet to receive compensation and how much. As of now, we are aware of eight investors waiting to receive a total of 268,350 POKT.
We trust that N4A will cooperate fully, and promptly provide all information required. Based on the investigationâs findings, counsel will request N4A to pay its investors their due and to do so promptly, say, within 15 days.
A lack of timely cooperation or a failure to issue payment within the time allotted will trigger legal action, e.g., the filing of a claim.
Some investors signed refund request forms containing a condition not to pursue legal action. This condition will be considered by counsel as its validity appears dubious.
Blog Article on Investigation Outcome
To enlighten community members, we will write a blog piece - âA Cautionary Taleâ - on the findings of the investigation that this proposal calls for.
Deliverables
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determine what actually happened at N4A, how many investors have yet to receive any refund, and what amounts
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based on what happened at N4A, consider whether those who received paltry refunds in USDC (and request a review) are entitled to additional compensation
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retain counsel to: (a) assist in the investigation as needed and to try to get prompt refunds without court action. (b) commence court action if necessary, and (c) refer matter to law enforcement if appropriate
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prepare report on learnings from this incident and include these in a blog piece
Contributors:
@zaatar, RawthiL, and Jerry; lawyer will be named before this proposal goes to a vote
Budget
Up to $2,500 for legal fees. Counsel will be retained by investors seeking reimbursement. The DAO will merely play a consultative role. The $2,500 being budgeted is for expenses and initial consultation. It is anticipated that legal work will be on a contingency basis, that is, fees will be paid from monies recovered.
Up to $7,500 to liaise with the lawyer, prepare this proposal, and coordinate its execution (@zaatar), trace funds on POKT blockchain (@RawthiL), correspond with aggrieved investors (@jerry), blog piece, and all other work.
Note on Legal Fees
The expectation is that once a lawyer is involved, N4A will behave properly for fear of being successfully sued and possibly having to pay even more (costs and other damages). N4A has already offered to give people their money back but has not followed through with all claimants. It may be that it just needs a nudge. Reputational damage from continuing to ignore refund demands after this proposalâs passage, plus the real threat of legal action hopefully will provide this nudge.
If not, counsel will be instructed to prepare and file a claim against N4A. Bear in mind that most lawsuits settle out of court.
Dissenting Opinions
Those who invested in N4A, like any investor in crypto, knew or ought to have known the risks.
Poktblade has noted that some of those who lost funds were âextremely crypto savvy,â but that due to protocol limitations at the time, had no alternative to custodial staking.
The Pocket DAO did not endorse N4A; that N4A announced its services in the Forum (Discourse) in no way constitutes an endorsement by the DAO. The people who feel theyâve been wronged by N4A should seek redress entirely on their own.
These arguments are outweighed by the counterarguments, including reputational issues addressed above:
The reality is that getting redress from N4A is no easy task for an individual. Banding together has its own challenges as affected investors are scattered across the globe and, for the most part, donât know one another.
Significantly, except for initial costs, we will not be paying a lawyer to sue N4A. We will simply be getting the legal ball rolling and taking to the next level the help that PNF has already provided with its efforts to mediate between claimants and N4A.
The crypto staking industry is mostly, if not entirely, unregulated. This attracts bad actors - and makes it hard for victims to get redress. (Our investigation will determine if N4A is a âbad actor.â) This lack of regulation is one reason why the DAO should step up. Were there a regulatory framework in place, investors could fall back on it for support. In the absence of such a framework, we should do what we can to provide that support - rather than retreat into resignation and write such losses off to the âcasinoâ of crypto.
Whatâs more, one could argue that Pocket Network owes a fiduciary duty to users of the Forum who staked with N4A after seeing its services advertised in the Overview of Staking/Pooling Services thread. Yes, a disclaimer appears atop this thread, but it could be argued that this does not fully absolve the Pocket Network of liability.
This sets a dangerous precedent. For one, we donât want the DAO bailing out community members. Second, the prospect of DAO backing a lawsuit against a business that may be fault free will deter other businesses from participating in Pocket Network.
This is a unique and egregious case. Investors have lost money through no fault of their own.
Re the reluctance of other businesses to participate in Pocket Network for fear of being sued when theyâve done nothing wrong, such fears are unfounded.
The only reason the DAO is backing this action is that N4A is acting unfairly: after many months and contrary to its promises, some investors are still waiting for refunds; it is unresponsive to claimants; it claims that its reimbursement failures are due to theft and that itâs taking legal action to recover the stolen funds, but it has not offered any evidence; and it has bullied investors by conditioning refunds on their agreeing to waive any claim against the company even if they get no refund. (See Time-Limited POKT Token Staking Program Refund Offer.)
NOTE: @zaatar did not stake with N4A, and does not operate a staking/pooling service or hold shares in any such service.
Copyright
Copyright and related rights waived via CC0 .
