Investors in Wonderland, a multi-billion dollar cryptocurrency project, have voted to continue the project after its co-founder was revealed to be a convicted serial scammer who previously co-founded a fraudulent cryptocurrency exchange.
An internet sleuth who goes by zachxbt accused one of Wonderland's co-founders, known as Sifu, of actually being Michael Patryn, the co-founder of QuadrigaCX, a failed Canadian exchange that investigators later determined to have operated as a Ponzi scheme near the end of its life. Although Patryn reportedly left QuadrigaCX in 2016, he has previously been convicted of computer, bank, and credit fraud, spent time in jail, and changed his legal name twice. The revelation shook investors and prompted the protocol's other founder to call a vote on whether to vote Patryn out of the project, and whether to wind the project down or keep going.
Chaos quickly overtook the Wonderland project, which provides an "algorithmic reserve currency" called TIME that is backed by tokens contributed by investors. Wonderland is run as a DAO (decentralized autonomous organization), where token holders can vote on group decisions. The shocking circumstances and weighty choices that faced the Wonderland DAO members were as good a test as any of the promises of DAOs, which are rapidly proliferating and pitching themselves as a new form of governance on the blockchain.
First, investors overwhelmingly voted to kick Patryn out of the project, ousting him as treasury manager, with 87 percent investors voting in favor of his exit. That was the easy part.
The vote on winding the project down ended only after a dramatic stalemate, with some investors calling for the project to dissolve and for its treasury of user-contributed funds to be refunded, and others fighting in support of the project. In the end, the grass-roots campaign won by a slim margin, with 55 percent voting to continue. Despite the signal to carry on, what form it will ultimately take is currently unclear.
Adding to the chaos are the words of Daniele Sestagalli, the founder of Wonderland and two other similar projects in the DeFi space (Abracadabra and Popsicle Finance, and their tokens), who wrote on Twitter on Sunday that “the Wonderland experiment is coming to an end.”
At that point, the vote on whether to keep the project alive was around a 50/50 split, and Sestagalli said that the only way forward was to reimburse and unwind those who don’t want to be part of the community, and “find a new home” for those who feel “attached & inline with the Frog Nation Vision,” referring to the community of investors who have gathered around Sestagalli's multiple projects in DeFi.
“I do not agree about continuing this experiment,” he wrote. But then, a few hours later, Sestagalli backtracked and wrote on Twitter that “We will continue building together as a community and get out of the FUD [Fear Uncertainty and Doubt] together.”
While all of this was going on, multiple proposals for how to move forward with Wonderland were being proposed. One proposal on Abracadabra, another of Sestagalli's projects, floated merging its treasury with Wonderland and was retweeted by Setagalli. Another idea that circulated widely called itself Wonderland 2.0. Investors also launched other unofficial votes, creating more confusion.
“Yeah this vote is bs,” wrote ilars23, referring to one of the unofficial votes, which asked whether investors wanted Wonderland to give people the option to stay or leave the project.
The end result was tons of confusion as investors wondered whether Sestagalli would respect a majority vote to keep the project going if it remained close. On Monday, after voting closed and the slim majority decided to keep the project alive, Sestagalli posted an announcement in Wonderland’s official Discord, describing communication as being “sporadic, confusing, and imprecise, and acknowledging the vote results without making a firm commitment on a way forward for Wonderland.
"There will be a period of calm over the next few days where we will listen to you, compile suggestions, and determine the best path forward," he wrote.
Over the weekend in the Discord channel, several Wonderland investors accused “whales”— deep-pocketed investors who have a large amount of tokens and thus votes—of working together to close down the project and cash out. The smaller investors then mounted a campaign to vote “No” and prevent the whales from deciding the future of the project.
“IF NO WINS, THIS WILL BE THE MOST LEGENDARY MOMENT OF CRYPTO SINCE THE BEGGINNING,” wrote one user who goes by rowettpt on Saturday, when the “Yes” was winning.
Another investor, named MAC10, wrote: “2022 YEAR IS THE YEAR WHERE THE FROG ARMADA STOPPED THE WHALES AND ESTABLISHED TOTAL INDEPENDENCE OVER THE GLORIOUS DAO OF WONDERLAND”
“Everyone. UNITE and show the power of frog nation,” wrote a user going by JensLyn.
Cypherxx wrote: “Dont lose the vision, you were never supposed to sell your tokens. They were supposed to be used in order to earn you a share of all associated revenue streams. Wonderland was supposed to make you quit your job. Dont lose sight of that. It can still happen. We got nothing to lose, let the new guys run things, see how they do, if they are bad, we fire them. Find another company to manage.”
On Monday, after the vote closed, some DAO members were still confused. For example, user Mondbrot wrote: “Stop playing games with my heart guys, this is a Rollercoaster ride of emotions :D So we gonna continue?”
Despite the vote to continue, Wonderland's future direction is still uncomfortably vague.
In an online chat with Motherboard, Sestagalli said that “for now Wonderland is like it was before the Sifu situation.”The project is collecting proposals and will go forward with a democratic process organized through the DAO to figure out what the next steps will be.
Sestagalli explained that initially he thought the community was “fractured” after the Sifu news, and that he received messages of hate and threats, which led to his tweets declaring the project irreconcilably split and dead. But now everything is different, he said.
“It’s pretty incredible,” he told Motherboard. “It’s the willingness to reorganize post Sifu. The funds are secure and the community has voted to continue. The interesting thing is the vote turnout, it’s never happened in crypto that so many people voted. History was made.”