P.R.I.S.O.N. Revision: Investigating Nodes4All and Getting it to Repay Investors



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.).


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.


N4A continues to drag its feet and leave investors’ 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, Pocket’s reputation will suffer harm.

On the other hand, a proactive approach on behalf of investors who feel wronged will boost Pocket’s 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.


Please refer to PEP-67.


Under this proposal, we will investigate, among other things, N4A’s 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 investigation’s 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 - “A Cautionary Tale” - on the findings of the investigation that this proposal calls for.


  1. determine what actually happened at N4A, how many investors have yet to receive any refund, and what amounts

  2. based on what happened at N4A, consider whether those who received paltry refunds in USDC (and request a review) are entitled to additional compensation

  3. 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

  4. prepare report on learnings from this incident and include these in a blog piece


@zaatar, RawthiL, and Jerry; lawyer will be named before this proposal goes to a vote


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 proposal’s 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 “extremely crypto savvy,” 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 they’ve 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, don’t 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 “bad actor.”) 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 “casino” of crypto.

What’s 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 don’t 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 they’ve 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 it’s 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 and related rights waived via CC0 .


@zaatar - I want to weigh in quickly on the media visibility piece in this proposal.

I’m personally highly aligned with what you’re trying to do and genuinely supportive.

However, I don’t think that it requires the media piece and I worry that this element could highlight historic weaknesses rather than current strengths.

I’d be happy to post a blog on our website, but I wouldn’t want to try to push it to crypto media - the PR angles within it don’t feel like they lend themselves to the narratives that we’re trying to build.

We have a media plan coming together and will be sharing more about that hopefully next week.

Just wanted to share my POV.


@zaatar Do you know how much is owed to the customers who have not received anything from N4A?


As of now, we are aware of eight investors waiting to receive a total of 268,350 POKT. One of the first tasks if the proposal passes will be to determine how many others are still waiting. I reached out to everyone who posted in PRISON and in Pocket’s N4A Discord channel but have not heard back from about half. There are likely others as well.

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Got it. Thanks for tracking all this down. It’s never been known exactly what the scale (or lack there of) this ordeal was.

I don’t believe this is at risk. This would only become part of POKT identity if we decide to make it part of POKT identity. I would have a hard time believing that there are people that stopped buying POKT because employees of a small staking company stole POKT from their customers.

I don’t see how this benefits the POKT ecosystem at all. POKT’s identity has nothing to do with the pathetic likes of N4A (pardon my French)… and I believe it would be a mistake to try to make it a central matter.

I share the same concerns as @Adz.

I believe the strong message that is actually needed, is “don’t trust anyone with your keys”. The DAO can’t be a free insurance plan for the entire ecosystem, especially if people are willingly trusting others with their POKT. There are too many risk factors if the DAO tries to act as a insurance for customers hurt by centralized companies in the POKT ecosystem.

I personally was willing to consider some kind of supporting action, but I don’t believe this is it. I believe it would be wise for the DAO to NOT be a central character in the N4A narrative. If perhaps N4A customers were pooling resources to address this on their own, I could have seen the DAO matching gifts, or something of that nature to show support as an outside party. I don’t see the benefit of the DAO being the central party in leading legal challenges.


I don’t support the DAO being the driving force in this matter. Thanks for all the work you have been doing in this @zaatar, but I just don’t see how this benefits POKT, and would not want N4A to be at all part of POKT’s narrative… so I feel it is worth my stating my thoughts.

I honestly believe all this work you have done could still benefit the victims, but I think they need to lead the charge, not the DAO. I think you have gathered enough information for them to build their case, so major props to you and those that contributed information. I do hope for justice in this matter :heart:


Thank you, @zaatar , for putting this together. While I do sympathize with the victims, I feel that the DAO stepping in could open a Pandora’s box that we may not know how to close, especially if the customers signed an agreement acknowledging the risks of losing their funds.

I do, however, have a question: did PNF/PNI (Grove) ever promote the company to investors as a trusted alternative on Pocket Network official documentations? If the answer is yes, then PNF or Grove needs to foot the bill considering they were the entities handling all communication mediums. And if the answer is no, then neither the DAO, PNF, nor PNI should intervene. But in either case, the DAO should most certainly not engage in this matter. Otherwise, we will be creating a dangerous precedent.

My reason is that The DAO does not have a say in anything other than through voting. If N4A was officially added to any documents, no one voted for it. In terms of reputation, others have alluded that this could hurt us instead. I don’t fully agree with that sentiment. I don’t believe doing absolutely nothing would hurt us. However, it could benefit us if we do something. It would show that we reject the notion that ‘not your keys, not your token,’ and that anyone can steal your funds, which is obviously the opposite sentiment across all other crypto communities.

In POKT, we believe in accountability. It’s in our DNA.


Than ks for this feedback. Agreed. I am removing this from the proposal.


Thank-you for sharing! This kind of info is very important.

I think it would be unwise to try and make any non-N4A party “responsible” for this. Trying to make 3rd parties “liable” for N4A is crazy IMO. N4A was their own company, they did their own outreach and marketing, so I don’t find the utility in trying to find another party to “blame”. This line of thinking is unproductive IMO.

Honestly, between the 8 within the current POKT ecosystem and all the others spread around other communities, I feel there is more than enough opportunity for a class action without this being a “DAO initiative”. I believe the victims should take charge, instead of the DAO, as I’m sure there is a lawyer out there that would take this one for the potential upside.

The DAO has already been used to gather information, help coordinate some fund recoveries, and warn users of the importance of non-custodial. Making the DAO the center point of legal actions is indeed a Pandora’s box.

It is unnecessary when there are already so many potential victims that could lead this charge.


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.


It is not appropriate or possible for PNF to provide escrow banking services for claimants

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If that’s the case, best solution is to select an attorney before collecting funds. (Post has been changed accordingly.)