South Korean KB Kookmin Bank Adopts Blockchain to Improve Internal Processes

South Korean KB Kookmin Bank Adopts Blockchain to Improve Internal Processes

Major South Korean bank KB Kookmin Bank is planning to integrate blockchain technology into its internal processes.

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Major South Korean bank KB Kookmin Bank is planning to integrate blockchain technology into its internal processes.

As local news outlet Korea JoongAng Daily reported on Oct. 7, KB Kookmin stated that blockchain technology could provide a spectrum of benefits to the financial industry, including the issuance of digital tokens, funding, custodial services and trading.

Taking a proactive approach toward blockchain adoption

As for the bank itself, it intends to deploy decentralized ledger technology to fight money laundering, improve verification services, custodial services and token offerings. Lee Woo-yeol, CIO at KB Kookmin, said that the bank should take a proactive approach toward blockchain tech, stating:

“We see blockchain as a big wave that will disrupt finance in the future. We need to be ready for the moment when different types of assets turn into tokens, although we don’t know when that will be.”

KB Kookmin’s experience with blockchain and cryptocurrency

In June, KB Kookmin signed a memorandum of understanding with blockchain tech firm Atomrigs Lab to jointly develop digital asset management services that use Atomrigs Lab’s technology and KB Kookmin Bank’s internal control infrastructure and data protection technologies.

The bank previously came under regulatory scrutiny from Korea’s Financial Supervisory Service (FSS), when the regulator criticized KB Kookmin and Nonghyup Bank’s management. The FSS stated that there was a problem with the so-called “suspicious transaction extraction standard of Kookmin Bank’s virtual currency handling business.”


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Major South Korean bank KB Kookmin Bank is planning to integrate blockchain technology into its internal processes.

FB’s Internal Q&A Sessions Reveal Early Strategy for Libra: Leaked

FB’s Internal Q&A Sessions Reveal Early Strategy for Libra: Leaked

Newly leaked audio from Q&A sessions between Facebook’s CEO and employees shines new light on the firm’s early strategy for Libra

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Newly leaked audio from Q&A sessions between Facebook’s CEO and employees revealed Facebook’s early strategy for Libra launch.

One month after releasing Libra’s white paper

On Oct. 1, tech news agency The Verge published audio and text from recent internal meetings at Facebook where CEO Mark Zuckerberg answered employees’ questions about the future of the social media giant. According to the report, the leaked transcripts cover two Facebook’s internal meetings in July 2019.

Along with major topics such as Facebook’s potential breakup by regulators, Zuckerberg devoted a significant part of the sessions to the company’s much-discussed cryptocurrency project Libra, which was officially unveiled in June 2019. 

Consultative approach

Zuckerberg underlined the consultative approach around Libra, elaborating that both Facebook and the Libra Association want to do their best to solve a number of issues before the actual launch of the project.

Speaking at one of the July’s meetings, Zuckerberg said:

“We want to make sure. We get that there are real issues. Finance is a very heavily regulated space. There’s a lot of important issues that need to be dealt with in preventing money laundering, preventing financing of terrorists and people who the different governments say you can’t do business with. There are a lot of requirements on knowing who your customers are.”

Private engagement is more substantive

During the session, Zuckerberg further outlined Facebook’s early strategy for courting regulators, stating that diverse proceedings around the project are going to be a long road because “this is what big engagement looks like.”

Facebook CEO also noted that private engagement with regulators will be more substantive and less dramatic than public procedures such as mid-July hearings between Banking Committee of the United States Senate and David Marcus, head of Facebook’s crypto wallet Calibra.

On Sept. 26, Zuckerberg reportedly acknowledged the difficulty the company faces against regulatory scrutiny and public perception around Libra. After meeting with major skepticism from European regulators, the Federal Advisory Council of the U.S. Federal Reserve argued yesterday that Facebook is potentially creating a digital monetary ecosystem outside of sanctioned financial markets, or a “shadow banking.”

Senator Warren slams Libra again

Meanwhile, Elizabeth Warren, Senator and presidential candidate and a known crypto critic, recently reiterated her negative stance towards Facebook’s Libra, urging global regulators to stop giant companies like Facebook from initiatives like this. In an Oct. 1 tweet in response to the leaked audio from Zuckerberg, Warren wrote:

“What would really “suck” is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anticompetitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy.”

Previously, Warren outlined a lack of evidence that Facebook does not plan to link the platform’s user data to their money transactions and keep those records.


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Newly leaked audio from Q&A sessions between Facebook’s CEO and employees shines new light on the firm’s early strategy for Libra

Only Reporting Part of Your Crypto Addresses? The IRS Needs to Know

Only Reporting Part of Your Crypto Addresses? The IRS Needs to Know

The US Internal Revenue Service (IRS) might be tracking your crypto addresses

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Just a few months ago in July 2019, the United States Internal Revenue Service (IRS) sent approximately 10,000 letters to cryptocurrency holders regarding their crypto holdings. The letters detailed that recipients may not have reported their transactions properly, or failed to report income and pay taxes on their digital currency transactions. 

The IRS asked the recipients to check their reports and submit delinquent returns or file amended returns according to specific requirements. According to the letters, the reports must be “true, correct and complete” in order to be approved by the IRS. But how can the IRS know the submitted reports meet their criteria?

It is a well-known fact that the IRS used Chainalysis back in 2015 to possibly assist them in their Coinbase case, in which Coinbase was ordered by a United States federal magistrate to report 14,355 users to the IRS.

Related: The IRS Is Blindly Coming After Cryptocurrency Traders — Here’s Why

What many people don’t know, however, is that the IRS continuously contracts Chainalysis to support their intelligence work on cryptocurrency investors. The last contract was signed on July 2019, with a completion date of August 2020.

Additionally, the IRS has enlisted the help of Elliptic, another company involved in blockchain analysis that supports regulatory compliance under several contracts, the last of them signed on September 2018, with a completion date of September 2019.

These contracts are a signal that the IRS has the following abilities:

  1. Connecting one cryptocurrency address to another: The IRS can automatically find connected paths of crypto addresses and trace the flow of funding, source and destination of a specific transaction. This technology enables the IRS to find the link between crypto addresses that have been reported to them with others that may not have been reported.
  2. Identifying exchange activity: While crypto trading on exchanges is off-chain and cannot be found on the blockchain, every trader must use a crypto address on the blockchain in order to deposit or withdraw their cryptocurrencies. The blockchain analysis systems have collected big data of exchanges addresses, which enable the IRS to link reported addresses to exchange activity.
  3. Identifying estimated revenue and cash-outs and monitoring large volumes of activity.
  4. Investigating criminal activity: Blockchain analysis companies provide support to the IRS in criminal and forensic cryptocurrency investigations.

Related: IRS Expands Penalties: Which Tax Mistakes Are Better Not to Commit

Why is it difficult to complete a report as per IRS requirements?

Traders who have a lot of activity or trade on many exchanges and use many wallets sometimes have difficulties tracking all their past addresses.

Furthermore, crypto investors that use crypto as a means of payment make many transactions to third-parties, just like any other payment service. However, unlike credit cards, crypto payments do not specify who is the third-party, and those who did not keep records in real-time will struggle to reconstruct the data. With Bitcoin (BTC), this transaction will also contain a change address that needs to be associated with the payer to get an accurate and complete report. 

What can you do to make sure your report is complete?

  1. Collect all your data before you start your calculation. First of all, you need to understand that although tax filing is something that most people feel like they “just want to get it over and done with,” it is a process that should be done properly, so ensure you take the time to properly collect your data. Collect your addresses from all the wallets, all data from your crypto exchanges, and all of your activities during the required tax period.
  2. Make sure nothing is missing. After you have successfully collected all your data, check for incomplete or incorrect information. There are some crypto tax platforms, such as Bittax or Blox, that track all your crypto addresses and combine them with exchange information. In the event that information is missing, the system will alert the user and will continue to send alerts until the user has completed or corrected all required information in order to provide a complete report.
  3. Disclose your missing information. Over time, it is possible that one of your crypto exchanges shut down, an address was rendered inaccessible due to hacking, or you misplaced your seed password and are unable to restore the information. If you are unable to restore or gather the information required, disclose the reasons to the IRS with supporting documentation if you have any. It is important to consult with a professional before filling with the IRS. Make sure that your CPA or legal advisor understands crypto taxation.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Or Lokay Cohen is the vice president at Bittax, a crypto tax calculation platform. Or has 10 years’ experience with regulation and managing a leading tax consultant firm. She holds an LL.M. law degree, a B.A. in communications and an M.A. in management and public policy. In her work at Bittax, Or promotes the goal of bridging cryptocurrency to the taxation reality to enable tax reporting under a clear regulatory framework and specific identification methods.


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The US Internal Revenue Service (IRS) might be tracking your crypto addresses

BitTorrent to Begin Alpha Testing Blockchain-Based Streaming Platform

BitTorrent to Begin Alpha Testing Blockchain-Based Streaming Platform

BitTorrent is beginning internal tests for its blockchain-backed streaming platform

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Major file sharing company BitTorrent, a subsidiary of blockchain company Tron, is going to internally test its blockchain-based live streaming platform in Q3 2019.

Platform overview

BitTorrent announced the news in an official blog post on Aug. 27. According to the announcement, the streaming platform — called BitTorrent Live (BLive) — supports live video content and an instant messaging service. Additionally, its underlying system reportedly contains a top user chart and a user relationship feature.

BitTorrent intends to roll out BLive in alpha, beta and full versions from Q3 2019 to Q1 2020. The current alpha version features a small group of users to internally test the platform as the developers continue to implement features.

Transactions and transfers on BLive

The platform also supports several different payment and withdrawal methods including Bitcoin (BTC) and BitTorrent (BTT) coin, with zero transaction fees. A number of third-party services are also supported for withdrawals and deposits, including PayPal, Google Wallet, Android Pay, Apple Pay, WeChat and Alipay. 

BLive will also support earning and gifting options. Users will be able to earn BTT rewards through activities such as technical maintenance, content creation and event planning. Additionally, users can buy gifts with BTT and send them to content creators — who can, in turn, convert the gifts back into BTT.

Previous plans for BLive

As previously reported by Cointelegraph, BitTorrent announced at the end of March that it would launch a public beta for BLive some time in Q2 2019. BLive has apparently been around since 2012, although its underlying software has changed dramatically. BLive apparently started out as a content delivery protocol with no emphasis on social media functions. However, the first version of BLive was cancelled following a failed fundraiser in April 2017.


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BitTorrent is beginning internal tests for its blockchain-backed streaming platform

Internal Revenue Service Sends New Round of Letters to Crypto Holders

Internal Revenue Service Sends New Round of Letters to Crypto Holders

Here we go again? Did you get the CP2000 notice from the U.S. IRS? Here is what you should know

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Last week, the United States Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports.

Using the information provided by third-party systems — such as crypto exchanges and payment systems — the IRS has been able to determine the amounts traders owe and included the amounts in dollars in the notices. Individuals who have received these notices are required to pay within 30 days, starting on the delivery date indicated in the letter.

Related: IRS Crypto Reporting Letter: A Wake-Up Call No Matter Who Gets One

If you think the exchange — on which you traded — provided your details to the bureau, you are probably right, but do not hold it against the exchanges. The regulation stipulates that all broker and barter exchange services are required by law to annually report trader activity on a 1099-B form, send it directly to the IRS and send a copy to the recipient.

In addition, transaction payment cards and third-party network transactions are also required to report on Form 1099-K, send it directly to the IRS and send a copy to the payee.

The IRS has not yet published specific guidelines for crypto exchanges. In fiat stocks, every broker must submit 1099-B to the IRS and send a copy to the trader. In crypto, the IRS still didn’t publish clarification whether exchanges should provide 1099-K or 1099-B.

Exchanges can benefit from the uncertain situation to provide 1099-K — like Coinbase Pro and Gemini — but some do not provide any forms, such as Kraken and Bittrex. Meanwhile, the exchange must provide the users with the 1099-K copy by the end of every January, so they will be available to use it in their capital gains report. The users, at the same time, don’t submit the IRS their copy of 1099-K, as they only use this form to calculate and report on their capital gains or loss report.

Similarly, earlier this month, the United Kingdom’s tax, payments and customs authority, Her Majesty’s Revenue and Customs, has reportedly requested that digital currency exchanges provide it with information about traders‘ names and transactions, aiming to identify cases of tax evasion.

Related: UK Crypto Regulation Is Changing, Recognition Looming at Long Last

In the U.S., data gathered from these exchanges is collected by the IRS and compared to every trader’s 1099-K report. If the reports do not match the data provided by the exchanges, the IRS will send the CP2000 notice to traders. The notice includes the amount every trader is expected to pay within 30 calendar days.

What’s more, the notice generally includes interest accrued, which is calculated from the due date of the return to 30 days from the date on the notice. This Interest continues to mount until the amount is paid in full, or the IRS agrees to an alternate amount. It means that interest began on the due date — on the day that you were supposed to report this for the first time. If you should, for example, have included this capital gains on your 2017 report, the interest will start on April 2018 — the last day you should have reported this gain. And it’s calculated until the reply date on the CP2000 notice.

Those who received the CP2000 letter have two options:

  1. If the amount proposed is correct:

Complete the response form, sign it and mail it to the IRS along with the tax payment.

  1. If the amount proposed is incorrect:

Complete the response form and return it to the IRS along with a signed statement outlining why you are in disagreement with the amount listed. It is important to include any supporting documentation to your claims. 

It is highly recommended to provide a supporting calculation that is comprehensive and includes all wallet activities and transactions carried out on all exchanges in order to have a complete and accurate report as required by the IRS.

You do not need to file an amended return Form 1040X, but if you choose to do so, you should write „CP2000“ on top of it.

It is important to understand that 1099-K reports for individuals trading crypto can be inaccurate in some cases, and does not include the cost basis, which is crucial for crypto trading calculations. 

1099-K only asks for the gross amount of the activity. In crypto reports, you need to know how much it costs you (how much you paid when you bought it) and not only how much you got when you exchanged it. You pay capital gains tax on the profit between the buy amount to the exchange (to fiat or another crypto) amount. 

The price you pay for it is called “cost basis.” Without it you will not have an accurate report on crypto. 1099-K forms don’t ask this information, only 1099-b forms do.

Therefore, crypto activity must be fully calculated and compared to the previous tax filing before replying to the IRS notice.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Or Lokay Cohen is the vice president at Bittax, a crypto tax calculation platform. Or has 10 years’ experience with regulation and managing a leading tax consultant firm. She holds an LL.M. law degree, a B.A. in communications and an M.A. in management and public policy. In her work at Bittax, Or promotes the goal of bridging cryptocurrency to the taxation reality to enable tax reporting under a clear regulatory framework and specific identification methods.


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Here we go again? Did you get the CP2000 notice from the U.S. IRS? Here is what you should know

R3 Plagued by Internal Conflicts Over Corda, Sources Claim

R3 Plagued by Internal Conflicts Over Corda, Sources Claim

Frustration and delay looms over the development of R3’s enterprise blockchain platform Corda, sources have alleged

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The development of R3’s enterprise blockchain platform Corda is being plagued by fundamental disagreements over its core vision, causing frustration and delay.

The claim was made in a report from FT Alphaville on Aug. 22, citing numerous insider sources.

“Corda maximalists” versus interoperability proponents

Sources close to R3 reportedly allege that there is a gulf between Corda’s engineers and its senior management as regards the product’s design and development. The engineers have purportedly lost faith in the technology itself, considering it to be functioning poorly and underscoring that it lacks scalability. 

They have also pointed to the allegedly 5-figure monthly bills R3 is ratcheting up in payments for cloud services, which cast a shadow over the platform’s long-term viability.

Other sources have spoken of tensions at the level of the workforce, accusing the R3 engineers of being susceptible to a “three-year itch” they believe besets the enterprise blockchain sector as a whole.

Sources have spoken of irresolution as regards R3’s identity — split between pitching itself as being a financial software firm to a more wide-ranging tech consortium. 

As regards Corda itself, they claim there is a lack of ambition and clarity regarding exactly what kind of blockchain it aspires to be — and whether or not it will at all remain committed to distributed ledger technology also known as DLT. 

This split has become tribal, they allege, with a split between so-called Corda maximalists and those open to pursuing interoperability.

The bottom line is that many reportedly fear the platform will not offer diverse businesses the efficiency gains it promises.

“Powerful but not very useful”

Among the R3 engineers, anonymous sources have said the consortium is trying to market software that is still ill-conceived and underdeveloped; they added that R3 is struggling to manage its burgeoning client base.

FT Alphaville was told by other in-house engineers that the flagship product “still feels like an engine without a car — powerful but not very useful.”

Notably, some have alleged the company would have faced a cash crisis had it not reached a settlement in 2018 with erstwhile rival Ripple over a legal dispute involving the breach of an option agreement that would have allowed R3 to purchase XRP at a discounted price.

Earlier this month, R3 announced plans to open a second European office in Dublin in 2020, just weeks after doubling the size of its London hub as part of an aggressive expansion plan.


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Frustration and delay looms over the development of R3’s enterprise blockchain platform Corda, sources have alleged

IRS Sending ‘Fishing’ Letters to Crypto Users So They Pay Taxes

IRS Sending ‘Fishing’ Letters to Crypto Users So They Pay Taxes

The Internal Revenue Service is sending letters to crypto investors to apparently scare them into accurately reporting their crypto-related income

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The United States Internal Revenue Service (IRS) is sending letters to crypto investors to apparently scare them into accurately reporting their crypto-related income.  

‘Don’t Panic’

According to a Forbes report by crypto tax attorney Tyson Cross, published on July 26, a number of Cross’s clients have received a letter “6174-A” from the IRS, threatening „future civil and criminal enforcement activity“ if they fail to fully comply with reporting requirements.

IRS Letter 6174-A

IRS Letter 6174-A. Source: Tyson Cross via Forbes

While Cross notes that the letter may give the impression that it is a personally targeted enforcement action, he argues that it is much more likely to be a generic mailing campaign intended to encourage voluntary compliance — one year after the IRS first launched its cryptocurrency compliance push. 

Although the agency could feasibly have identified tax cheats and sent the letter to specific individuals, Cross notes that over a dozen of his clients — all of whom accurately reported their crypto-derived income — had received the letter. 

Much more likely, he claims, is that the IRS has used its list of taxpayers identified in 2017 by Coinbase and conducted a blanket campaign to exert psychological pressure on investors. He notes: 

“This would seem to indicate the IRS is sending these letters to taxpayers as a fishing attempt without any real belief that each recipient has under-reported.”

Cross writes that several other tax professionals have revealed to him that their own clients — despite accurate reporting — had also received Letter 6174-A.

The IRS hopes to tighten the noose

Cross advised investors not to panic should they receive the letter, but to thoroughly ensure the accuracy of their tax returns, given that at the very least it means they are on the agency’s radar. 

As previously reported, data released ahead of the close of the preceding tax year indicated that just 0.04% of tax filers were reporting capital gains from crypto investments to the IRS.

Back in July 2017, the IRS had required that major U.S. crypto exchange Coinbase hand over detailed information on every one of its then 500,000+ users in an attempt to prevent tax evasion. However, a court order in November 2017 reduced this number to around 14,000 “high-transacting” users, which the platform later reported as 13,000.

An alleged presentation by the agency earlier this month reportedly revealed that the IRS hopes to use Grand Jury subpoenas on firms such as Apple, Google and Microsoft to check taxpayers’ download history for crypto-related applications.


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The Internal Revenue Service is sending letters to crypto investors to apparently scare them into accurately reporting their crypto-related income

Internal Power Struggle at MakerDAO: When Coding and Personal Interests Collide

Internal Power Struggle at MakerDAO: When Coding and Personal Interests Collide

The MakerDAO company, based on the philosophy of decentralization, has split into factions as a result of a struggle with the power centralization

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In the crypto industry, there are many examples of how a conflict of interest has led to a company split. Perhaps, the largest ones are the forks of bitcoin (BTC), bitcoin cash (BCH) and the Ethereum (ETH) network. As a rule, the reason lies in disagreements related to the philosophy of the project, its development or financial components.

Various views on how the platform should be managed led to the conflict of interest at the headquarters of MakerDAO. It all started with the fact that Andy Milenius, the company’s chief technology officer, left the project, as reported by Cointelegraph on April 28. Internal conflicts have been aggravated by the recently found vulnerability and trials between the key members. How far can it go and will we witness another fundamental split in the blockchain company?

Chapter 1: Vulnerability

MakerDAO is the preeminent lending platform for the DAI stablecoin — which is dollar-pegged, no less. The MakerDAO project is also a decentralized governance platform. It is through the MakerDAO platform that MKR token holders vote for the execution of changes in the DAI lending protocol. In essence, the platform’s governance system works on the principle of granting several proposals encoded in the form of Ethereum addresses. Users vote for the proposals of their choice by freezing MKR tokens in the voting contract as pledges.

Between April 22 and 26, a critical vulnerability was discovered and analyzed on the MakerDAO platform by the security audit firm Zeppelin. The vulnerability impacted the very functioning of MakerDAO by making user funds irretrievable. By exploiting the system’s vulnerable coding, attackers could gain access to the system and freely move the tokens staked in favor of one MakerDAO governance proposal to another — perhaps even a competing proposal — and lock them in place forever. On May 6, the MakerDAO team released an appeal to its community on Reddit:

“In partnership with Coinbase and Zeppelin, the Maker Foundation has been participating in a second round of audits of the Maker Voting Contract. During this process, we discovered the need to make a critical update. […] You are advised to move your MKR out of the old contract and back into your personal wallet immediately.”

Chapter 2: Andy Milenius’s departure

What could have seemed as a routine error in code at the inception of MakerDAO turned out to be much more as the plot thickened with the sudden departure of Andy Milenius, the project’s CTO, in early April. His departure was preceded by a voluminous 24 page-long letter published on April 3, which begins with the words, “Currently, the Maker development team is going through its most difficult challenge that I have witnessed during my 3.5 years with the project.”

In his letter Milenius outlined his long-standing conflict with MakerDAO CEO Rune Christensen and the former’s attempts to usurp the platform, which began back to January 2017:

“He [Christensen] told me it was necessary that he have full unilateral control over the Dev Fund from that point forward.”

As stated by Milenius, though later Rune abandoned this idea, the whole situation led to the creation of the opposition, aimed at preventing Rune from ruining the project and at protecting the community’s funds.

Another event that affected the professional relations inside the company, according to Milenius, was the appearance of Matt Richards, who, in the spring of 2017, assumed the responsibility of the chief operating officer. According to Milenius, Richards was not only not familiar with the technical side of the project, but did not support the very idea of DappHub, the separate project led by the MakerDAO developers and initiated by Christensen to better manage the company’s processes. In addition, his invasion of the project interfered with the work of designers and developers, which soon led to internal conflicts and affected the platform’s development:

“Matt especially hated the concept of DappHub. He thought it was an unprofessional arrangement and also seemed to feel personally insulted that they wanted to remain an entity separate from the organization he was trying to create. He would ask me countless times to explain to him why they felt culturally distinct from him and why couldn’t they just be a part of the “family” he so desperately wanted us to be. […] I had told the DappHub developers to let me handle the business of dealing with Maker because I knew they would only get stressed out by Matt. This advice ended up being a huge mistake, as the core dev team was not around to object to the organizational decisions he was making until it was far too late.”

As the situation got worse, Milenius requested Christensen to fire Richards:

“I told him that Matt was consistently a distraction and wasted my time by proposing stupid ideas that needed constant rebuttal. I told him Matt’s opinion that the core developers were ‘my developers’ was preposterous and that I refused to control them and get them to ‘report’ to me like he wanted. I told him that Matt had done a lot of good for the project but that it was time for him to go.”

However, even with Richards’s departure, the atmosphere inside the company did not improve. According to Milenius, Christensen was dissatisfied with the work of key developers — and they, in turn, tried to resist his attempts to monopolize the developers fund and spend all the money on his strategic initiatives.

“They [the developers] said it was unfair that Rune gets to spend the entire Dev fund on his strategic initiatives. […] They said Rune shouldn’t be able to monopolize access to the Dev fund like that because he isn’t a god and other people might have differing points of view or priorities.”

As the conflict inside the company smouldered further and involved new people, more and more people began to disagree with the way Christensen tried to take control of the decentralized autonomous organization (DAO), with the result that the main project developers from DappHub stopped cooperating. As stated by Milenius, his ideas of equal working space and democratization inherent in DAO, and the desire of his fellow executives to traditional corporate efficiency hadn’t been accepted by Christensen. Later, Milenius confirmed to the media that he is no longer the technical director of MakerDAO.

“The purpose of the Maker Foundation was to formalize existing social relations in the Maker community. It is currently failing at this purpose and needs to be corrected at the fundamental level.”

Chapter 3: The opposition

The charade of departures from the company’s board has so far been focused on preventing the consolidation of power in the hands of Christensen. When the company’s infrastructure expanded and disagreements began to arise, Christensen offered the developers two options for cooperation: the Red Pill and the Blue Pill.

Those who chose Red Pill were supposed to work for him inside the Maker Ecosystem Growth Group (MEGG) on the initiatives that “he was going to eventually document in the much-promised Strategic Plan.” The tasks were aimed at delivering government compliance and integrating Maker into the existing global financial system. The Blue Pill was prepared for those who didn’t want to work on those initiatives. Their primary duty was the implementation of Multi-Collateral DAI (MCD) core contracts needed to launch a fully autonomous system, after which their relationships with the company would cease.

According to Milenius, nobody accepted those binary options since they conflicted with the main idea of the decentralized company. General discontent led to the creation of an opposition group that called itself the Purple Pill in March 2018. Members include former MakerDAO business development executive Ashleigh Schap, who proclaimed that they aimed to make the company more decentralized. Schap, who has allegedly created the group, is now suing MakerDAO in a $1 million lawsuit.

The real aim of the pseudo-Matrix saga, Blue and Red Pill amalgamation in the form of the Purple Pill faction was to dethorne Christensen and take control of the $200 million fund. So far, Purple Pill has been brewing its plots and accusations in the Signal chat with former members of the team:

“The name Purple Pill was chosen because the hope was that there was a third way available to break up this binary choice. They thought this was an earnest attempt to add resiliency to the overall Strategic Plan.”

In his letter, Milenius claims that many people, including board members, were added in the group after they agreed that the third way was desirable. At the same time, the creators and participants of the group pursued exclusively positive goals, wishing to save the organization and prevent the consolidation of funds in the hands of one person:

“No one thought about the fact that they were board members, they just wanted to talk because these were some of the most senior and respected contributors in the project.”

As the Purple Pill group was growing, tension was also rising on the Foundation Board. Christensen requested a large amount of MKR tokens from the Foundation Board for allegedly funding and expanding operations. When the members asked for more transparency and requested documents that could confirm his demands, he was surprised. This event could also become the reason why he later accused board members of conspiracy, when he found out there was a Signal group:

“He couldn’t believe that people would treat him this way when he had broken his back working day and night for this project, sacrificing his own personal happiness and health like so many other entrepreneurs do. He had been under so much pressure for so long trying so hard to make this work that when he discovered the group, he snapped. Conspiracy. Corruption.”

As a result, some board members who participated in the Purple Pill group were fired.

Chapter 4: Here comes Campbells

MakerDAO has seen its fair share of woes, and they were only aggravated when five of the nine board members requested the Campbells law firm for assistance after they had been forced by Christensen to leave the company.

David Currin, Denis Erfurt, Thomas Pulber, James Reidy and Kenny Rowe wrote a collective letter in an effort to contest the accusation made by Christensen and to prove their innocence. The expansive letter contains their collective confession that all five had been doing their jobs, a denial of conspiracy against the foundation’s management and statements about sullied reputations.

The letter also refers to the Purple Pill affair. All five claim that the discussions were neither conspiratorial nor clandestine, and involved a large group of people engaged in the project in various capacities, exploring ideas with a shared goal of protecting and advancing the project.

The letter reveals that on March 22, 2019, the general counsel at MakerDAO, Brian Avello, contacted the five former board members via email with a request to attend a meeting regarding “urgent things on the regulatory front.” The meeting was a pretext for the CEO to confront the five regarding the Purple Pill group and demand that they either resign voluntarily or be removed as directors of the foundation.

The accusations thrown at the five by Christensen were quite weighty, ranging from conspiracy to corruption, placing the project at risk and scheming to breach their duties.

While none of the five case participants replied to a request for a comment, it remains to be seen how the drama with legal action will unfold.

Chapter 5: Matt Richards replies to Andy Milenius’s letter

On April 27, Richards published an answer to Milenius’s accusations in a Reddit thread — thus, providing a chance to address the story from a different angle. In particular, he acknowledged the mistakes he made while working as the MakerDAO COO and noted that, relying on the fact that all members of the company were acting out of good intentions, he did not take into account the growing disagreements of the staff of MakerDAO, instead of working under a single aegis.

Richards also referred to Milenius as the person who was mainly interested in technical nuances and coding, rather than in the project’s development:

“According to Andy, no amount of accountability was acceptable, the efficiency that came with explicit hierarchy did not outweigh how uncool or unfair it was, MKR investors interests were of little consequence, the dev fund was for “hacker aesthetics, development tools, Free Software, grassroots empowerment, memetics, the Unix Design philosophy and especially the political implications of decentralized technology. […] And if Maker’s vision was built as a by-product, cool.”

Being less eloquent than Milenius, Richards ended his post with optimistic forecasts about the future of MakerDAO:

“I am hopeful about the future of this project and believe it will likely be better off without Andy.”

The scheme of the relationships inside MakerDAO based on its members' stories

Community’s reaction

The situation may look intriguing if viewed from the point of those truly affected by the scandal and the system vulnerabilities — the MakerDAO community, namely because it is their money at stake. The multiple comments left by Reddit users under Richard’s letter are examples of irony and emotional upheaval. The community’s reaction is best described by a comment left by a user nicknamed “ShiIl,” who stated:

“Like the Greek dramas of old, there is no real bad guy here, just people doing their best with varying motivations.”

Other users referred to the idea of decentralization and pointed out that, in such corporations, the control shouldn’t be accessed by only one person:

“The whole point of this thing is to avoid trusting one individual! Even if Rune is a saint, the whole point is can’t be evil not don’t be evil.”

Meanwhile, there are some users who found nothing unusual in the situation:

“This seems like a rather typical situation of a CEO trying to run a business and deliver value to investors while the CTO constantly gets distracted by ‘cool’ features which don’t drive revenue. It’s a common issue in many companies and generally the result of having a CTO who is technically skilled but lacks business acumen. Such people should not be given leadership positions in a technical team. The goal of the CTO is to build the tech the company needs, not the tech they want.”

Consequences

The biggest risk thus far is the vulnerability found in the system, since it could be only a matter of time before someone, somewhere tries to take advantage of it. The company has already announced that it has developed a fix together with Zeppelin and the implementation of it was underway. But the internal power struggle within the company remains the most worrying aspect of the entire conundrum surrounding MakerDAO. If the team continues the conflict, then these issues may soon eclipse any of the technical difficulties the company has — and the community may have the last say on the matter.


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The MakerDAO company, based on the philosophy of decentralization, has split into factions as a result of a struggle with the power centralization