# An update and disclosure concerning Secret Foundation's Financial Transparency
**URL:** https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762
**Category:** Secret Governance
**Created:** [January 27, 2023, 9:16pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762 "2023-01-27T21:16:43Z")
**Posts on this page:** 10
**Page:** 1
### Author:  [@guy](https://forum.scrt.network/u/guy)
#### Post date: [January 27, 2023, 9:16pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/1 "2023-01-27T21:16:43Z")
The Secret Foundation was created to support the expanding Secret Network community and pledged to operate transparently and with good governance as a non-profit organization. Initially, the foundation was intended to have a responsible board of directors to ensure accountability, a compensation committee, and regular financial statements and annual audits conducted by an independent third party, however, these measures were never implemented.
As time passed, the community began to notice that the foundation isn’t fulfilling its promise of good governance. Complaints from community members increased and they demanded that measures be put in place to ensure transparency and accountability in the use of funds. Several actions were taken by the community to push for transparency, including [proposal 103](https://secretnodes.com/proposals/103) which received 88.78% approval. Despite these calls for transparency, the Secret Foundation continued to make promises to operate in a more transparent manner but failed to follow through on them.
Recently, the situation reached a boiling point as some community members made serious allegations against Tor and the Secret Foundation, accusing them of lacking transparency and mishandling funds, hiding the true nature of their financial activity from the community. The situation became so dire that personal intimidation was reported, and SCRT Labs had to intervene to help diffuse the situation. At the same time, further incidents came to light, specifically regarding the mismanagement of funds in an OTC deal conducted by the Foundation, which resulted in the loss of ~$250K in funds – an incident that was left unreported for over a year and a half and SCRT Labs had no knowledge of.
As a result of these events, it became necessary to re-examine the current and future structure of the Secret Foundation. This led to a series of calls with Tor, the Founder and the most senior officer at the organization, during which additional information came to light that we felt we could not ethically ignore and had to bring to the attention of the community.
To the best of our understanding, the following has occurred in late 2021:
- Secret Foundation sold a substantial amount of USD worth of SCRT.
- Tor cashed out a significant portion of these proceeds (to the best of our understanding, a figure in the low-to-mid seven figures) as a dividend.
- This action was not disclosed in any financial reports provided to the community by the Foundation, which was introduced by Tor as a non-profit organization on several occasions. In particular, the Q4 2021 report indicates a cash inflow of ~$4m for SF, but does not mention this withdrawal.
In addition, there are potentially other unreported financial irregularities, such as an open loan to Alameda or one of its affiliates by the Secret Foundation. To the best of our knowledge, the loan or its lack of repayment have not been disclosed to the community in any of the reports.
In our opinion, these actions seriously undermine the community’s trust in Tor and as a result, of the Secret Foundation, and it reinforces the demand of the community to have a truly open, transparent and accountable Secret Foundation organization that acts in accordance with its mandate.
Therefore, our suggestion is to work with the community to structure a new Secret Foundation that operates as advertised, and as a network of Secret’s magnitude deserves. The initial blueprint we suggest is:
- All current funds held by Secret Foundation (In both crypto and fiat) to be returned to the community and to serve as the basis for a new and improved organization, which will be formed under new leadership.
- The new organization will be comprised of current Secret Foundation employees, along with Secret Agency members, and will be registered as a non-profit and will maintain a transparent and audited activity.
- In the first few months (and perhaps longer - assuming funds permit), this new organization will utilize the funds returned to the community. Long-term, it will submit annual funding requests to the chain with a clear budget, milestones, and asks.
- We will work with the community to establish a strong Board of Directors, including an executive director, comprised of industry leaders. Similarly, we will look to build a Technical Advisory Board to help steward the network into the Secret 2.0 era.
As a community-driven organization, it is important that we hold those in leadership positions to the highest standards of transparency and compliance. We understand that this issue needs to be addressed in order to ensure the integrity and effectiveness of the Secret ecosystem.
As a final note, we’d 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 address the necessary changes, and this restructuring will help the platform reach new heights as we work towards our Secret 2.0 vision. We have great community members and contributors, incredible and well-intentioned employees of Secret Agency and the current Secret Foundation, and with such a force, there’s really no obstacle we cannot overcome together!
– SCRT Labs
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### Author:  [@oljo](https://forum.scrt.network/u/oljo)
#### Post date: [January 27, 2023, 10:48pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/2 "2023-01-27T22:48:35Z")
I’m sure everyone will have a few questions, one of mine would be , why the drag it out?
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### Author:  [@tor](https://forum.scrt.network/u/tor)
#### Post date: [January 28, 2023, 3:52am UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/3 "2023-01-28T03:52:49Z")
Adding Foundation’s own disclosure to this thread for ease of reference and discovery.
> [@Secret Foundation Update and Disclosure](https://forum.scrt.network/t/secret-foundation-update-and-disclosure/6763):
>
> Hello to the Secret family, I’m writing in order to provide an update regarding the ongoing operations of Secret Foundation and its past actions. This update was prepared yesterday and has just completed legal review. I let SCRT Labs know the Foundation statement was under review this afternoon and I was looking forward to making this disclosure to the broader community. This was not acknowledged, and they have posted their own update in the intervening hours. First, some facts and history: In…
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### Author:  [@thenodefather](https://forum.scrt.network/u/thenodefather)
#### Post date: [January 28, 2023, 4:32am UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/4 "2023-01-28T04:32:44Z")
Cross posting here to ensure continuity of discussion.
I appreciate Tor’s transparency in providing an update on the operations of Secret Foundation and some of its past actions. _ **However, I am still unclear on how the compensation schedule for the founder explains much. It seems that the compensation structure was created at your discretion and without any prior disclosure to the community, it could have been anything you decided and what you wrote would have applied, in fact that’s exactly what you did.** _
As previously asked in this post, many members of the community are questioning the future of the remaining funds from the Secret Foundation. Will these funds be returned to the community? It would show a commitment to acting in good faith to both ensure continuity for current employees and to allow the community to move forward in its goals.
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### Author:  [@AnewbiZ007](https://forum.scrt.network/u/AnewbiZ007)
#### Post date: [January 28, 2023, 2:57pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/5 "2023-01-28T14:57:07Z")
I am very saddened to be reading this. Because I believe wholeheartedly in the mission of the secret network, and this type of situation is divisive and destructive. I am frustrated by how this situation can harm the network and community.
The main things that I would like the community to focus on, is the betterment of our community and the secret network as a whole.
This process will have pain, no way around that. But I have high confidence that we will come out of this stronger than ever.
I have this confidence because Our community is filled with strong and intelligent people with a vision for building the foundation and infrastructure that the decentralized future needs. The community is filled with talented, focused, and (for the most part) like-minded individuals. And we are a global presence, truly remarkable beyond most startups even in the decentralized space.
Betting against the SCRT network is a bet I would never take. Indeed I am betting on the Secret Network with a lot of skin in the game.
For me, I will be even more focused than ever to support and build this network and community with the Agency and whatever new structure we build going forward. And I will be happy to add input as we move forward in action plans and help in any way that I can.
To any SF or Agency members reading these posts that may be down or uncertain, my DMs are always open to talk as I know the Agency leads are as well. We will get through this and be better for it.
I look forward to upcoming proposals to move forward, encourage the community to come together, and hope we can make a swift transition because this is valuable time to be building and positioning for success.
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### Author:  [@mumuse](https://forum.scrt.network/u/mumuse)
#### Post date: [January 28, 2023, 8:01pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/6 "2023-01-28T20:01:38Z")
My thoughts regarding this:
- The community seems to be in a position where Tor shouldn’t have been allowed to make any more money than a (presumably modest?) salary, otherwise being scandalized at the fact there were vested tokens seems weird.
- I think a token agreement existing isn’t an issue, I think us having no idea about it is the issue (and it’s a big issue). Also, “we don’t have money for messari or hackathons” but we would do for such compensation is kind of a meme considering the above.
- Tor failed in disclosing the terms of his own token agreement properly.
- Failing to disclose this event makes it so that the current situation is untennable, as we still don’t even know all terms of his agreement.
- While not forgetting the numerous positive contributions it has made to the ecosystem, the C Corp structure must come to an end.
Going forward:
- I think the current runaway (mid? 7 digit millions of USD is my understanding) isn’t bad treasury management for a non-technical organization, especially considering we are in a 90%+ bear market.
- Ideally all existing token agreements should be disclosed as a single amount (in order to preserve privacy of individual foundation members). The terms of these must also be known in order to understand how that affects runway if there are any binding terms.
- We must ensure a smooth transition.
- The new entity must be setup and ready to hit the ground running before it receives the funds.
- This transition period must account for the existing foundation employees, and they should be given fair advance notice of how their conditions of employment will change.
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### Author:  [@Robert\_SecretNFT.com](https://forum.scrt.network/u/Robert_SecretNFT.com)
#### Post date: [January 29, 2023, 8:00pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/8 "2023-01-29T20:00:19Z")
Trust for the Secret Foundation is gone. Until trust is restored it is in the best interest to suspend all funds and activities until a complete autopsy lays out the facts of what happened. Until the autopsy is complete I recommend that we nominate trusted community members to act as the custodian of funds for the Secret Foundation. I nominate Brendan @Brendan and Jordan @JXR50 as interim custodians. In the meantime, it is in the best interest of the community to transfer any and all responsibility away from @tor immediately until proper due diligence is done and trust can be restored within the community.
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### Author:  [@Jiricepelka](https://forum.scrt.network/u/Jiricepelka)
#### Post date: [February 1, 2023, 10:17am UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/9 "2023-02-01T10:17:48Z")
I fully agree, it’s only a short-term solution anyway.
For me the long term need is to move the Secret Foundation treasure to the DAO ( ideally Senate form ) concept
In the long term we should be trying to remove the need of trust, not restore it.
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### Author:  [@gov\_dao](https://forum.scrt.network/u/gov_dao)
#### Post date: [February 1, 2023, 10:41am UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/10 "2023-02-01T10:41:36Z")
This is interesting, because of course you can have a NPO DAO LLC (As Secret Agency is already formed), or you take the NPO Foundation route. In terms of the NPO DAO, the treasury is governed on chain by membership ID´d through token holdings. The only thing I see that prevents this, is the conflict between privacy and the requirement for DAO members holding more than 10% of governance rights to be KYC´d. I also do not like the risk of governance attacks that DAO treasuries can be exposed to if not protected or structured properly.
On the other hand, an NPO Foundation, would have as its purpose:
1. Protection of all endowed assets and beneficiaries. So Beneficiaries being the protocol, token holders, validators etc. Assets being the treasury, protocol IP etc.
2. Growth and management of Secret Network
3. Grants management
Governance of the NPO Foundation:
1. Founder /s
2. Council
3. Guardian
Council and guardian can be made up of key community stakeholders. So for example:
1. SCRT DAO / Labs /
2. Validators
3. Non exec council members
4. Professional Trustee
Together, the council and guardian would protect the treasury and ensure that it is sustained and used for the purposes agreed to be carried out by the NPO Foundation. I do believe it is fundamental to ensure that key community stakeholders all take a seat on the council. To represent all interests.
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### Author:  [@oljo](https://forum.scrt.network/u/oljo)
#### Post date: [February 1, 2023, 8:08pm UTC](https://forum.scrt.network/t/an-update-and-disclosure-concerning-secret-foundations-financial-transparency/6762/11 "2023-02-01T20:08:07Z")
