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Matchpool CEO Moves 37,500 ETH Right After ICO, Scaring Investors




The CEO of Matchpool moved a sizeable chunk of crowdsourced funds, right after the ICO. This scared investors, as well as caused a rift that led to a co-founder’s departure.

Matchpool, an Ethereum-based dating app, recently raised $5.7 million (in only 48 hours) in its ICO. Shortly after that, 37,500 ETH was withdrawn from Matchpool’s multisignature wallet by CEO Yonatan Ben Shimon. This, coupled with internal miscommunications, caused a panic and raised some red flags. Philip Saunders, cofounder of the app, announced in the project’s Slack channel that he was leaving Matchpool. He wrote:

“I regret to announce as cofounder of Matchpool that I am leaving this project. I was involved in architecting Matchpool, writing the white paper and writing the first draft of the smart contracts. I was not involved in the implementation of the ICO. I have asked internally what is going on with the funds you sent to Matchpool, but have not received a satisfactory answer.

Over the last two days 37,500 ETH has been withdrawn from the multisig wallet by the CEO, Yonatan Ben Shimon without any explanation or announcement due to the need for ‘hedging’. Yonatan keeps claiming he's working with Bitcoin Suisse and it's all okay, but so far I haven't seen any evidence of this. I suggest you all demand an explanation and keep a close watch. In all likelihood your guppies are worthless- the terms and conditions seem deliberately designed to prevent contributors having legal recourse in the case of misuse of your money. In either event, I believe the standards of transparency and integrity in this organization are well below what is needed for a blockchain project, which is why I can no longer a part of it.”

This stirred up a mild panic online, prompting several redditors to post the news and initiate discussions in the subsequent comment threads. Fear began to spread that Matchpool’s CEO had pulled an exit scam after hyping up a bogus project with the intent to take in ICO money and then disappear. However, digging into Matchpool’s Medium blog, a post from April 3 states that 10% of the ICO funds were hedged into bitcoin (BTC) because “the Ether price is currently volatile.” The post announced Matchpool’s plan to convert 12,500 ETH to 504 BTC (the final numbers, as of this writing, ended up being 37,500 ETH converted into 1,450.66 BTC). In light of Saunders’ statement, an update was added to the blog post, which read:

“Information Update: We had a miscommunication within the team and I want to correct my original post. The funds were not sent to BitcoinSuisse or Smart Contract Japan. The funds were sent to a secure Trezor wallet, which can be seen below. It was a hectic day we’ve had a couple of sleepness [sic] nights so I apologise [sic] for the misinformation.

It would have best to communicate this first to the community before completing the transaction, however Ether was extremely volatile and the decision was made quickly in the interest of the project’s future.”

It seems Matchpool is acknowledging the uncertainty caused by not making the “hedging” intentions clear. Matchpool’s Maximus Richardson posted this statement on Matchpool’s official reddit account:

“Hi Everyone,

I am just catching up on some last few hours of events and as a Co-Founder of the project, (this is a message I sent in Slack an hour or so ago and just wanted to repeat it across our touch points where I felt there was confusion or concern).

Firstly, we had a very successful crowdfunding campaign. We are delighted by the result and all the funds are secure and safe. There was some miscommunication amongst the sleepless nights over the last couple of days and so I have updated the public post about moving a % of the funds here:

Secondly, we understand there has been some information spread about the team and I want to clarify any misinformation about Matchpool. Between our team members and we’re [sic] working to resolve them as best as possible. We’ll give an update next week on the progress of the team and management structure.

We thank you all again for supporting the project. And we’ll keep everyone informed in the coming weeks to future plans and developments. We’ve learned from this experience and we understand that we need to communicate such events in advance to avoid confusion and concern amongst the community.

Thank you. Max & The Matchpool Team”

Matchpool made its investors nervous by not being entirely forthcoming with its plans for handling funds after the ICO. This obviously rubbed some people the wrong way, including Saunders. Taking to Slack again, he offered a final statement, writing:

“Final statement. My role in this was not as a ‘dev’- I'm a systems architect and writer with knowledge of Solidity and a focus on the Ethereum platform. One red flag for me early on (which I'm sorry to say I ignored at the time) was the lack of actual devs on this project. Yonatan told me two of his personal programmer friends in Israel were doing a prototype, but they aren't on the team as you can see.

I don't want to sabotage a working project. The fact [is] it was not working. It was clearly being run by a technically incompetent opportunist. Unfortunately the ‘ICO’ bubble attracts such people. I created Matchpool and I want it to succeed, but that was not going to happen with the direction it was going in.

At this stage there are two options: either a new set of smart contracts be drafted so that contributors can withdraw their Ether, or Matchpool is given a better core team and improve their practices. I still want this project to succeed and contributors shouldn't be harmed. At the same time I hope this leads to some soul searching about the ICO model which gives ‘investors’ no rights while skipping the work of actually building a business. Cheers.”

Saunders clearly has strong opinions about how Matchpool operates. The whole argument was pretty one-sided until Shimon released a new blog post on Medium, titled: “Matchpool’s ongoing commitment to transparency and technology,” in which he offered his side of the story regarding the recent post-ICO controversy. He wrote:

“At the very beginning, I met with both Philip and Max and offered them to join me in the attempt to create our platform Matchpool. At first Philip was in charge of writing the Whitepaper, Max was dealing with the site, design, and publications, and I took the part of building the team finding resources and initiate the campaign.

Unfortunately, as the project continued and matured we felt Philip’s contribution to Matchpool had been deteriorating. As we approached the ICO, Philip’s job was supposed to be writing the ICO smart contract code.

After Philip had finished his work, we transferred it to Parity for code review. We were then told by them that the code was not ‘Auditable’ contains severe mistakes, written in poor quality and should be written all over again from scratch. And so we ended up hiring guys from Parity to re-write the contract and then we moved it for further checks to Zeppelin.

Despite his clear lack of skills and lack of respect, we decided to continue as usual and recruit additional developers to work alongside Philip.

Soon after the ICO was finished, Philip approached me asked for a share of the total ICO funds. When I told him that such payment is subject to a full-time position as a Matchpool developer and informed him about our intention to recruit additional developers, he reacted the way he did.”

It’s still troubling that this happened at all. Just because a person has good intentions doesn’t mean investors would feel comfortable with how easily ICO funds could be moved. According to Matchpool, its plan was to convert Ether to bitcoins (due to ETH “volatility”) and then convert the bitcoins to USD which would then be held in a company bank account.

Matchpool’s current stance is that it has never been a scam, and it was simply a disgruntled employee who started waving red flags. It claims that it wound up with poor code from Saunders and had to search for other developers. The company has recruited a new CTO to ensure the delivery of the platform. The ICO funds are kept securely in cold storage in a Trezor hardware wallet, proof of which they provided here.

This whole situation speaks to the need for investors to make sure they’re doing their due diligence. Always thoroughly vet a project before investing any amount of money. That being said, it’s generally good advice to never invest more than you’re comfortable losing, regardless of the investment. There’s volatility in every market, more so in the crypto-space. Do your own research and trust your intuition.

Jim Manning

Jim Manning lives in Los Angeles and has been writing for websites for over five years, with a particular interest in tech and science. His interest in blockchain technology and cryptocurrency stems from his belief that it is the way of the future. Jim is a guest writer for ETHNews. His views and opinions do not necessarily constitute the views and opinions of ETHNews.

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