PEP-67: Pursue Recovery of Investment against Staking Operator Nodes4All (P.R.I.S.O.N)

[Cryptocorn]

Attributes:

Author(s) Cryptocorn

Category: PEP Funding Proposal

Recipients: TBD

Asking Amount: UP to $10,000

Summary
Nodes4All (N4A) was a major US based staking provider. Since they informed their investors that they were closing operations on October 2nd 2023, they have failed to return funds.

Investors have not been informed about what has happened, if their funds have been stolen, or there have been other malicious actions. The Nodes4All Telegram channel has been closed to comment or updates, as has the N4A Discord.

This proposal seeks to first establish the facts of what happened to the Nodes4All Investor funds, then to finance legal action against the management of Nodes4All to recover funds and act as a deterrent for future attempts to steal investors POKT.

Background/Motivation
Nodes4All was an early and major staking provider for the Pocket ecosystem, managing the staking of tens of millions of POKT at its peak.

It’s management consisted of Henry and Pat, who were trusted leaders in the Pocket space and vocal participants, respectively. The management resides in the US, assumed in Florida, the same state as many of Pocket/Grove’s management is based. IT is known that Pat has physically turned up to Pocket events.

On October 2nd 2023, Nodes4All decided to close down their POKT staking operations. They asked all stakers to fill out an unstake form:

On October 27 2023, Nodes4All provided an update that they had started to refund some investors and that they expected all refunds to be processed by 5th November.

November 1st, Pat wrote: “please hang tight we are returning everyone’s tokens”

November 3rd, Pat wrote: “I have everyone’s withdrawals here and am in processing”

November 6th, Pat wrote: “Everyone that hasn’t received tokens just fill this out and we will start processing as we are receiving back our tokens from the various locations.

We are no going anywhere, we are here to make sure everything is unwinded properly.”

Sometime after that Nodes4All shut down their Telegram group and disallowed posting.

Pat has not read or returned any messages:

Henry has occasionally responded but has not explained what happened and has repeatedly missed his own deadlines to return funds.

Currently on the 19th December, many investors are still waiting to receive their funds.

Deliverables:
This proposal hopes to:

1. Clarify what has happened at Nodes4All, how many investors have been affected and the amount still outstanding.
2. Nominate a representative to attempt to negotiate with Nodes4All to return their investors funds in a timely manner.
3. Create a budget to take the first legal steps against Nodes4All to return user’s funds and consider additional legal options available for damages caused, and what financial laws have been broken to refer to state and federal agencies for prosecution.

Budget:
A maximum budget of $10,000 is asked for (POKT to be sold OTC and funds custodied by PNF in a similar manner to the ERA and other USD budgets), to investigate the above and pay a retainer fee to a law firm to begin preliminary investigations.
If a suitable resolution can not be found, more funds may need to be made available to further pursue this issue, voted on by additional proposals.

Rationale:

1. We don’t know what has happened to the investor funds custodied by Nodes4All and as they are now several months late in returning funds and have failed to communicate/actively stopped communication, we first need to understand the issue, its size and the options available to help POKT investors recover their funds.

2. PNF, the DAO and the Pocket Community has a whole should send a strong message that they won’t accept stealing or malicious behaviour. Allowing 3rd party companies to steal POKT without consequence is ultimately damaging to our ecosystem. By pursuing and punishing bad actors severely we can send a strong warning to future potential malicious actors.

3. If funds were stolen, it is likely that the thief will want to ‘dump’ the POKT quickly onto the market and ‘cash out’. This would bring millions of POKT of unnecessary sell pressure to Pocket, causing a decline in POKT price. This would affect everyone who holds POKT, not just those who’ve had their funds stolen by Nodes4All and incentivize a vote for this proposal.

*** Copyright***
Copyright and related rights waived via CC0.

[Mythrin]

This is an unfortunate event, but it should be funded by those who had their funds stolen and not the foundation.

People have been shouting from the rooftops for years now that any custodial solution has immense risks and this scenario has happened time and time again. Not your keys, not your coins.

We encourage everyone to use non custodial solutions that are readily available across multiple node operators in the Pocket space.

We shouldn’t be setting a precedent that the foundation is going to foot the bill for investors lost funds. I have empathy for those who lost their funds and they should create a group where someone puts the lawsuit together at their expense.

[ugosemh]

Agree with your point. Although a solution funded by the victims and headed by the PNF make total sense.

[RawthiL (Ramiro | POKTscan)]

This is indeed unfortunate, I don’t know how to proceed but it does not feel right that the DAO should finance this, unless it has been directly affected or if the DAO is somehow part of this problem.
Anyway I have some questions that I think will help clarify and asses the impact:

• Is there an estimation of the total POKT not returned by Nodes4All?
• IF the funds were stolen, do we know the compromised address?
• Do we know the addresses (nodes and/or wallets) operated by Nodes4All? (I do not known any domain name connected to them, if you know, I can track them)
• How many users are affected? (an order of magnitude at least 10x, 100x 1000x?)

[msa6867]

Pat’s Telegram account is linked to a mobile phone number (310) 505-4246. His telegram is still active in that it is not deleted, but the message I sent two weeks ago has not been read yet.

There word on shutting down service was that they were loosing money and quitting the crypto space.

I had 8 nodes with nfa; I received all my tokens back about 3 weeks after filling out their withdrawal form on oct 7.

The sending address for return of my pokt was f265492d2beacb155621653437efa4fa4b6b57b1

The receiving wallet to which I originally sent POKT to funding my nodes was 77e28c2b89ba9f2318639e5bb71dfbfd0dd2db72

I’m sure I have a record of my node addresses somewhere, but mot sure that would do any good; you should be able to look up all the nodes they ran from their domain (blokhub) filtered for unstaked nodes

I’m pretty sure Pat is a DAO voter, and therefore doxxed; thus it should be fairly easy to reach out to him.

I do not know, but I am guessing that the order of magnitide of those affected is ~10 ppl. I say this because the lion’s share of their node business was running nodes for their f&f. Opening up to the larger community was a later pursuit and I’m not sure how much traction it got.

[shane]

Their dashboard shows all their nodes: Stats Dashboard - Nodes for all

I’ve checked about a dozen of them and they all were staked last with c0d3r (cc @bulutcambazi). All the nodes I looked at were unstaked last year.

Here is all the node addresses: Nodes4All Addresses - Google Sheets

[Cryptocorn]

• I’d like to give N4A a chance to formally respond and give us information before we go to a vote.

• it’s incredibly short-sighted to think this is only something that affects N4A stakers and we/the DAO/PNF shouldn’t help or use funds.

We should aggressively go after people who steal. Stealing hurts our entire ecosystem. It hurts Pocket’s marketing and it hurts your bags when thieves market dump.

An ‘aw shucks’ approach to malicious behaviour only encourages more. We should stamp it out immediately.

[mike (Mzynga)]

I had some token staked with them,I got them back but that was before they announced they are shutting down.
If the foundation has to foot this bill then does that mean in future anyone willing to offer staking services has to go non-custodial solution or the foundation will be in another situation where they might fund such efforts.
This would be noble though.

[tony]

Provided that the google sheet shane provided is correct, this is what it looks like

[Nightcloud]

I’m of the impression a leading representative for N4A will clarify the situation quite soon. I base this on conversations I’ve had with involved parties.

[Nodes4All]

We’re incredibly shocked and saddened to see this proposal, but most of all I’m confused about why this was created in the first place. We have returned the vast majority of tokens to pool members (cryptocorn included), but did experience a theft by our long-time admin as the pool was shutting down, so a few members still need to get tokens back. As we pursue legal actions to take to recover the stolen funds, these defamatory claims will be part of those considerations.

Right now we are in the process of returning funds to the remainder of affected parties, and have asked anyone who still does not have tokens returned to PM us. We are very sorry that this has happened but are committed to doing the right thing by anyone still affected.

[shane]

@Nodes4All

these defamatory claims will be part of those considerations.

For the record, there is nothing wrong or “defamatory” for folks to signal that customer funds were not being returned, and there was not proper communication from the team as to why that was. Thank-you for now confirming that theft was involved.

This is a very unfortunate situation you are in, and I feel for those trying to make this right. I wish all the best in addressing this injustice

[RawthiL (Ramiro | POKTscan)]

Thanks for providing the N4A version. Since you are confirming that there was a theft and you say that there are only a few members that did not receive their funds back,
Could you give us the address of the stolen wallets so we know if we are dealing with stolen coins?
Also, can you provide clarity on how many individuals are affected and the total amount of POKT in debt? (rough approximations can suffice if you want)

I’m still trying to get a feel of the total damage this caused to the community (and economy if stolen funds were dumped).

[Cryptocorn]

Thank you to @Nodes4All for offering a reply.

1. As the community has expressed, we’d be interested to know:
   a) how much $POKT was taken?
   b) how many users were affected?
   c) how many users still have not had their investment returned?
   d) can you provide the wallet addresses of the alleged thief so that funds can be tracked?
   e) what has and is being done to recover funds?

2. While we appreciate Nodes4All offering their explanation for the delay in funds being returned, it would only be fair to offer ‘PJ’, the alleged thief, a chance to respond. Notifying him or offering his contact details so that we can offer him a chance to respond to the allegations against him would be helpful in potentially shedding further light on this matter.

3. Nodes4All have been saying for many weeks that they will refund the remaining customers. Unless a reason can be offered, there is nothing stopping refunds being processed promptly. I hope that all refunds can be processed by the 2nd January 2024. If funds are not returned by this date, this proposal will be sent to be voted on and the DAO to take next steps.

[Vladje1122]

Dear @Nodes4All,

I’m shocked to see above reply. I’m still waiting for a refund of my POKT tokens. We’ve been in contact on Telegram, but not getting any reply for days now. You mentioned you’be happy to guide me through things, but theres not much guiding required if I’m correct. I really hope we can settle this asap. Would love to close things out and start fresh in 2024. Still waiting for your reply. Kr, Vladje

[Cryptocorn]

It has been 14 days since this proposal was posted and unfortunately @Nodes4All are yet to return their investors POKT.

As such, I’d like to call @JackALaing to put the above proposal to a vote and move forward.

I volunteer to attempt to mediate with Nodes4All the return of their investors POKT. However, if they would prefer to work with a member of PNF or acceptable 3rd party, I can furnish the mediator with my information collected to date.

I continue to hope that while I personally received my POKT from Nodes4All, that all the other investors receive their investment promptly and in full.

[shane]

Not to make things weird, but the @Nodes4All user was created the day of that comment. We may not be getting info from an official Node4All source… it would definitely make more sense for folks to get info directly from a verified team member.

Not saying it is or isn’t a Node4All team member, just pointing it out.

Disregard: A 3rd party vouched for the account. Just ignore me.

[andrewm198]

I havent received my POKT despite filling the withdrawal form twice as instructed last Nov. Also I’m not sure where the POKT would actually go as the form asked for an EVM address.

[jimi]

Hey everyone, just created the account to support OP.

I got only partial of my POKT back even though i filled out there form in time.
Paying for a Node Service and not receiving the full pokt amount back is just not right.

[doctorrobinson (Zak)]

Appreciate the sentiment and support everyone has here, and i feel for anyone who has lost funds; crypto can be a harsh place sometimes.

Please give me until Tuesday next week to speak with the Foundation and see if we can get directly in contact with the NFA team to collect some information. Unless anyone else has information on it, this could be as small as a few people and we could be spinning our wheels thinking this is a much larger group or amount than it is.

I will follow up after the PNF Monday call and drop an update.