SmartStake, a major validator in the Cosmos ecosystem, has announcement that it will close its nodes following revelations about the founder of the Secret Foundation, Tor Bair, personally taking profits.
Exodus of validators
The validator cited “complex/stressful validator operations…cost/effort of validator operations…recent events” as reasons for shutting down their service. Smartstake further stated
“Please note that the shutdown will be graceful and there will be no cut-offs for any of the delegates.”
NotionalDAO, another Cosmos validator, echoed SmartStake’s statement with CEO, Jacob Gadikian, confirming that “NotionalDAO will no longer be discussing its node, in solidarity with SmartStake.”
Secret Leadership Conflict
The allegations against Bair were revealed on January 27 via the foundation’s governance forum. Guy Zyskind, the founder of Secret Labs, released the statement in which the allegations were made public.
Zyskind revealed that “Secret Foundation sold a substantial amount of USD from SCRT”. Additionally, “Tor collected a significant portion of these proceeds…as a dividend.” These actions were not disclosed to the community, with approximately $4 million withdrawn in the fourth quarter of 2021 alone.
The resulting plan proposed by Zyskind was to dissolve the Secret Foundation by returning the holdings to the community and reforming a new foundation under new leadership. The new organization will “maintain a transparent and audited business…(and)…it will submit annual funding requests to the channel with a clear budget, milestones and requests”.
Additionally, the post ended with Zyskind looking towards the future of Secret Network;
“As a final note, we would like to say that while we raise and acknowledge these concerns, we are at the same time very optimistic about the future.
The Secret community is well equipped to deal with the necessary changes, and this overhaul will help the platform reach new heights as we work towards our Secret 2.0 vision. “
Bair’s version of events
Bair also announced the same governance forum stating that withdrawals are simply part of its acquired tokens. The Secret Foundation founder said he started earning a salary in 2021 and acquired “some of my tokens” by December.
He went on to confirm that he made an “OTC sale of SCRT tokens,” converting the tokens to USD and holding the stablecoins with the foundation to be used to pay him a dividend. He further revealed that he has 375,000 SCRT in vested tokens and received a dividend of $2.625 million and claims so.
“This information is verifiable in our 2021 tax returns, which have already been reviewed by Labs, and I have already disclosed this information to them.”
Bair seemingly through his hat in the ring as he revealed “now is the time for change”, but he “communicated privately and publicly repeatedly about my desire to be a part of this change”.
In direct response to the allegations made by Zyskind, Bair commented;
“This allegation is false. We previously posted our disclosure about this event, which is available on this forum.
A debate continued in the comments and on Twitter, whether the community thinks there was malpractice or if people are more concerned that Bair appears to have sold the top for over $7.
At press time, Secret Networks, SCRT is trading at $0.80, nearly 90% below Bair’s selling price.