Proposal for the Restructuring of the Secret Foundation (UPDATED 2.2.23)

Secret Governance
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In light of recent events, the Secret Network community has raised concerns about the current structure of the Secret Foundation and its operations. To address these issues and promote transparency, a proposal for restructuring the Secret Foundation has been developed.

Objectives:

  • To establish a new foundation as a non-profit organization (NPO) with a transparent operation.
  • To transfer the assets of the old Secret Foundation to the new NPO, while ensuring capable team members’ compensation and benefits are not affected by this transition.
  • To appoint a non-affiliated trusted third party (hereon the “Trustee”) to oversee the transition process within a concrete timeline.

Formation of the New Secret Foundation NPO:

The new Secret Foundation will be registered as an NPO and provide an annual account of its activities, including key performance indicators (KPIs), budgets, and goals. The Foundation’s annual budget will be authorized by the appointed board members and the financial statements will be audited by a certified third party. Executive compensation and any related party transactions or conflicts of interest will be shared with the community quarterly.

Ideally, the new Secret Foundation’s scope will expand compared to the present-day situation, and will include members from the existing Secret Foundation, Secret Agency and new members. Professional and industry leading board members and executives will be hired.

Community members who are to be appointed to the board will first need to be approved by the community. A single organization within the ecosystem (including SCRT Labs) cannot have more than a single board seat. The board is expected to have at least three members (and most likely more), assuring that no single community related party can control the majority of the board.

Transfer of Current Funds:

The stated goal of this proposal is to complete the transition period within 90 days. At that point, a new NPO should be in place and all net assets would have been transferred to the new organization. In the interim, and to make sure an orderly transition occurs, we propose the following milestones:

  • Within 14 days, Secret Foundation will produce a trial balance to the Trustee accounting for its current balance sheet, and a summary of its monthly cash burn based on its current obligations.
    • Secret Foundation will produce to the Trustee any supporting material and information, such as financial statements, returns, agreements, etc they need to verify this information.
  • Within 14 days, Secret Foundation will transfer to the Trustee control of all crypto assets it holds, and within 30 days a fiat Escrow account will be set up and all fiat funds will be transferred there for the duration of the restructuring.
  • From these transactions, the Secret Foundation will deduct six months of expenses to meet its obligations as reported.
  • Once the restructuring is completed, a final account of all liabilities will be produced and all net assets, whether they are held in escrow or remain at the Secret Foundation will be transferred to the new Secret Foundation NPO.

Role of the Trustee:

To address the lack of trust within the community and any potential conflict of interest, a non-affiliated third party with relevant knowledge and certification will act as the temporary manager of the restructuring process and custodian of related funds. The third-party (i.e., the Trustee) will:

  • Establish the legal structure for the new Foundation NPO.
  • Restate contracts with employees and suppliers.
  • Set up a custodial account, and examine existing liabilities, with a stated goal to keep as many of the community assets intact.
  • Issue a report to the community on the results of their examination and any proposed mitigations.
  • The trustee will have the option to ask the community for additional time to complete the process, which the community will be able to approve or disapprove via a governance vote.
  • Tor will have visibility into the Trustee selection process, including the ability to suggest Trustees. However, he will not be making the final decision, which is reserved for the community. * (Amended 2.2.23)
  • The trustee will notify all stakeholders ahead of time about any potential tax implications before transferring the funds to the escrow accounts (both Crypto and Fiat). * (Amended 2.2.23)

Conclusion:

The proposed restructuring of the Secret Foundation into a non-profit organization and the appointment of a trusted third party to oversee the transition process will enhance transparency and foster trust within the Secret Network community. The timeline presented will ensure that this process is handled effectively, fairly and most importantly - swiftly and decisively.

Vote “Yes” if you support the action items laid out in this proposal that propose the efficient and timely restructuring of the Secret Foundation as an NPO.

Vote “No” if you believe in the current status quo and wish to maintain it.

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This proposal was prepared with community members and alongside SCRT Labs. As mentioned in the governance call yesterday, every member of the community should take this to heart and vote according to their true beliefs. As always and especially as it relates to this proposal - If you’re a validator, rest assured that how you vote would not affect our delegation to you.

Furthermore, we are starting the process of finding a suitable trustee. If anyone wishes to lead this process instead of us please reach out. Alternatively, for transparency, we asked Pmucke to be an observer to the entire process. We would like to identify and add two more observers from the community. Please either nominate people here or privately, or come talk to us to discuss.

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I wholeheartedly support this proposal.
We ensure a smooth transition into an NPO structure with this. We also allow the current (for-profit) Secret Foundation to have enough time to wind their existing operations down in a structured manner.
This is the way we want to proceed here. I have full trust in SCRT Labs as well as the broad community and its abilities to make this transition as smooth as possible. I deeply hope that the Secret Foundation will adhere to this plan.

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This is actually pretty bullish! Seems to address the NPO and getting community funds back. I can only hope going forward Tor acts in good faith and does the right thing.

Listed things for me that should happen going forward NPO created, Eric Tor Bair returns money, and provides audit publicly ideally, tor can stay in Secret, Tor should have no future control of community funds, and have no veto power on the NPO board.

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I have reviewed this proposal privately and agreed that it could be posted publicly so that my questions could be asked openly. I have a number of concerns with the proposal as it currently stands, specifically the timelines discussed, when there are so many open points left to resolve.

Here are some of the questions:

  • How will the trustee be selected or compensated? Which organization(s) will be funding this process? Have any potential trustees already been identified?
  • Where will the NPO be domiciled?
  • How many employees/contractors is the NPO expected to have initially? (Not counting vendors, only functional roles)
  • If this is an off-shore NPO, what ongoing benefits will be afforded to employees?
  • What are the benefits to Secret Network of having this entity structured as an NPO, beyond more transparent reporting and controls? How will NPO status impact network adoption, global growth, developer acquisition, or other KPIs?
  • Will the NPO have tax advantages? If so, how will they be achieved?
  • Will the organization have NPO status at inception? If no, what is the expected timeline for this entity to receive NPO status? Who specifically is responsible for applying for NPO status?
  • Who will serve as director(s) for the NPO?
  • How will this transition impact reporting structures for existing employees of Foundation and Agency?
  • Which organization(s) will fund the establishment and setup of the NPO or further research of NPO structures?
  • How will this NPO integrate the current processes of Secret Agency? How will it interact with Secret Agency’s established entity, if at all?
  • What is the exact scope of this NPO? How will it integrate the current stated scopes of Foundation and Agency? What functions will it explicitly not perform, and which organization(s) will perform those exempt functions?
  • How will this NPO interact with SCRT Labs? How will these processes differ from the current integrations between Agency, Foundation, and Labs?
  • What are some of the suggested initial KPIs? Are the KPIs linked to the scope of the NPO? Are any of the KPIs based on achieving market-related goals such as price or market capitalization? Will KPIs be benchmarked against other ecosystems?
  • How, if at all, will KPIs affect executive or employee compensation?
  • How will initial board members be selected or recruited, and by whom? What are their desired qualifications? Will they be compensated in any way?
  • If any of the answers to the above questions are still undetermined or unknown, who beyond the selected trustee is charged with researching or establishing their answers? What are the expected timelines for answering these questions? How will these timelines be assured?

I ask other community members to ask their own questions and give feedback so we can clarify the proposal in advance of taking next steps.

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Why haven’t you answered any of these questions yourself for the current SF? These are questions you were unwilling to answer, and you’ve had a few years to do that.

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I agree wholeheartedly that these questions need to be answered and I regret not having answered them satisfactorily in the past. My main concern is answering them now so we can confidently take next steps as an aligned community.

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Regarding scope:

Scope should be what agency and Foundation are now handling separately.

items like:

  • Global events
  • Network brand
  • Marketing/Seo
  • BizDev
  • Developer relations
  • Application relations
  • Technical writing
  • Content and education
  • News and press

I think Agency and Foundation can put forward a proposed scope and necessary roles within a few weeks.

Items definitely not in-scope:

  • Core development
  • Infrastructure
  • Research
  • Product/Roadmap

Some of the items mentioned under in-scope will have to be co-managed with SCRT labs, especially developer and application relations, BizDev (apps in particular), Technical content and Global events.

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Most of these questions are immaterial, as a professional third party (an actual lawyer with expertise) will address those concerns and more. Starting a crypto NPO is not hard, has been done hundreds of times by ecosystems way smaller than Secret. The playbook has been written, no need to reinvent the wheel.

Also, as you mentioned, you failed to do this yourself for 2.5 years. It is clearly time to bring someone neutral to handle this swiftly and professionally.

Posting dozens of questions does not make this complicated.

I will only respond that Re: how the Trustee is identified and selected - that has been addressed.

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I think this is fine and resolves many community members concerns.

How do we ensure the assets get shifted to the the new foundation? Do we have a rough estimate on that amount?

The 6 month funding seems like a good way to end it amicably I suppose and avoid to much disruption.

Do we have some people already wanting to put their name up for vote on the board?

Do we know how realistic it is to meet these time frames? Do you need outside consulting hired?

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Fully in support, as the transparency issues from the Foundation have been dragging us down since inception, when the agreement of setting up an NPO was not respected.

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thats a lot of questions. i think its better to start with an answer. Are you and/or the Secret Foundation willing to give back the funds held in both USD and crypto back to the community so a new NPO can be set up?

without this answer the rest of it doesnt matter

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Do you support the general sentiment of this proposal or against it?
Do you have concrete concerns that make you ask those questions? Can you name them to give context to your questions?

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I don’t see why these questions are the most urgent thing to deal with. What is the point of sanding everyone’s eyes while ignoring everything that matters?

I completely agree with that proposal. The collaboration between all relevant actors will make implementation easier and help us to move forward. Since we all care about this chain, I don’t see any reason why this shouldn’t work.

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Also Guy are you going to put out a full statement on the list of concerns leading up to this decision? Given a lot of the history and information is scattered it could lead to even worse levels of speculation on the reasoning.

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A very neutral and fair proposal that will hopefully allow us all to move forward towards the same goal. This proposal will increase transparency and trust in an orderly and swift restructuring of the Secret Foundation into an NPO and thereby remove the uncertainty currently felt by some.

A lot of questions have already been asked in this thread within the first minutes, many of which have never been answered for the current Foundation. In view of stability and community cohesion it is important that we as a community agree on a common goal that we want to move towards. Therefore, I’d like to propose we forgo the typical 7 days of discussion on this proposal and instead have 3 days of discussion before moving on-chain for voting. The questions asked thus far should not have a material influence on the endgoal and thus shouldn’t impact the voting on this proposal.

Certain things are still unclear, but with this proposal we can come together and agree on what we want to achieve in the next months and have that be guided by a neutral third party operating transparently and with full trust of the community.

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I think he made this post to address this @CCosmonaut : An update and disclosure concerning Secret Foundation’s Financial Transparency

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I support the following statements:

  1. Changes must be made to the current Foundation, and they must be made in a way that benefits the Secret ecosystem consistent with our original mission: growing the network and supporting its members.

  2. If new entities are being set up, they must be resourced appropriately for their success and their structure should be considered extremely carefully. This should not be done on the fly - the desired end state and the strategic reasoning behind it should be known ASAP, hence my many questions above.

  3. My opinion at this time is that a portion of the resources of the Foundation (as it currently is structured) should be used to support the future structure and operations of whatever entity or entities result from this process, PROVIDED there is clarity as to how it/they is/are expected to operate, who will operate and control it/them, appropriate timelines for a transition, clarity on trustees and controls, etc. Foundation employees have also asked for clarity before committing themselves to participating in any transition, and their questions have been included in my list above.

I have made other statements elsewhere reflecting my thoughts on next steps as well.

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This seems extremely reasonable given that this topic has been the longest discussed topic on the Secret Network. I fully support this.

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Appreciate the response and discussion. I’m glad that we’re all in agreement that there needs to be changes going forwards.

Regarding #3, can you elaborate on referring to a “portion of the resources”? In your eyes, would the current resources of the foundation be used for anything other than the goals outlined in the proposal? Just wanted to make sure, as I didn’t see any specific questions about that in your initial response.

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