Wide Support for DAO Action
Virtually all of the feedback to date supports DAO action to help the victims of the Nodes4All debacle. The question is what action should the DAO take.
Before addressing that, I’ll respond to some of the points that have been raised.
(For readers who may be reading about this for the first time, Nodes4All was a staking service that closed last October. Despite promising to do so, it has failed to refund many of its investors, including some active community members.)
Strong Message
This is misplaced.
Nodes4All promoted itself as a fractionalized pooled Node-running service. Non-custodial staking was never – and still is not - an option for those staking less than a node, that is, under 15,000 POKT. When N4A appeared on the Pocket scene in early 2022, non-custodial staking was not available even for those with enough tokens to stake a full node.
Given the high cost of staking a node (about $2,700 at a token price of $0.18) and (hopefully) more if the price rises, we should encourage and support solutions that allow smaller investors to participate in staking even though currently this requires relinquishing coin custody. So while “not my keys, not my coins” is one takeaway from the N4A case, another is the need to make fractionalized staking as safe as possible for those who cannot afford to stake a full node.
Reputational Damage
As faultless as Pocket Network may be, it will likely be tarred by the same brush as this “small staking company.” That’s herd thinking. “Pocket? Oh, that’s the project where people got ripped off.” Insiders may know that Pocket did not have a hand in these losses, but the facts will be lost on the general investing public.
The risk to the Pocket brand is all the greater given the large pool of potential victims:
BHAG Goal: ‘Most Trusted Brand’
How will we achieve the BHAG goal of having ”the most trusted infrastructure brand in crypto,” if we resign ourselves to inaction where a 3rd party preys on our community and we do nothing to help?
What Action Should the DAO Take?
Post-Mortem Vital
This proposal has two prongs: the first is to find out what happened so that lessons can be drawn for the mutual benefit of stakers and staking services.
The second prong is to help the victims.
Below are some of the options that appear to have traction; based on your feedback I will finalize this proposal.
Not a Bailout
There is consensus that this help should not take the form of a bailout.
Preference has been expressed for the DAO not to “lead the charge.” This makes sense. Besides our not wanting to set a precedent, the victims are motivated. Angry and with the most to gain, they should drive this forward.
What kind of support, then, should the DAO provide?
Logistical Help
The DAO should help with logistics especially at the start. Given that victims are spread across the globe and mostly don’t know one another, we can help identify them and assemble a group interested in exploring legal action. We can find out what each person is owed by N4A and how much each can contribute towards legal fees.
Help Find an Attorney
Since many victims likely reside outside the U.S., we can help to find a lawyer to take this case. We can attend the initial legal consultation, and monitor subsequent steps, so that we can report back to the DAO. Once a group of victim plaintiffs gels and the case moves forward, they can assume most, if not all of the work.
Victim Waivers
By submitting the most recent refund application, applicants who got legal advice agreed to waive any claim against Nodes4All - even if they never get a penny. They also had to agree not to sue Nodes4All or its owners. The lawyer will consider the validity of these waivers at the outset. Victims can participate in and fund consultative legal work without publicly disclosing their identities and ostensibly also without fear of violating the refund terms.
For excerpt of waivers click here
“6. Any eligible Staker…having received appropriate legal counsel, by …submitting the refund request…regardless of its outcome, agrees to waive any present or future…claim against the Company…its shareholders, employees, directors, beneficial owners…or any natural person…
Stakers also agree to do [sic] not participate or benefit in any future litigation that any other party might promote in the future whether separately or through a class action where applicable. .. This point 6. will still be valid and applicable even if specific portions of it may or are deemed illegal or ineffective in certain jurisdictions.”
$25K for a lawsuit
According to Dermot, retaining a “branded” law firm or even a “mid-size” one to draft and send a letter of claim would likely run $25,000. If there are 20 or more investors all willing to contribute, say, between $500-$5,000 depending on the size of their investment, sufficient funds can be collected to move this action forward.
What Will the DAO Funding Cover?
The DAO will pay for the work of the contributors to this proposal: Ramiro to help trace POKT on-chain, Jerry to liaise with victims and myself to orchestrate and prepare this proposal.
Should it also fund legal fees?
No. The victims should cover these. They can work out a funding arrangement with the attorney. As they’ll be paying, they will decide how - and how far - to proceed.
Matching Grant
At the outset there may be insufficient resources due to a shortage of identified victims who are able or prepared to contribute. Shane raised the possibility of helping from the sidelines by “matching gifts or something of that nature.” In the event that there is not enough money from the victims identified early to cover initial legals, the DAO could match their contributions up to an agreed maximum. If more financial help is required from the DAO, this could be considered later.
DAO Not Taking Responsibility
To be absolutely clear, the DAO is not taking responsibility for the failures of Nodes4All and any losses the company has caused. The DAO is merely providing a helping hand.
NOTE: I have not yet spoken with a litigation attorney. If you can recommend one based in Florida (Miami) or Illinois (Chicago), DM me.