Secret Foundation Update and Disclosure

Secret Governance
1

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 2020, I left Enigma and founded Secret Foundation. The organization has been structured as a US C-Corp since its inception. In the interest of transparency, Secret Foundation has regularly released a series of Transparency Reports. These reports include a review of our activities, mission as an organization, our priorities, and certain data disclosures. For privacy reasons, these reports have never included token compensation for any employee. Certain reports include salaries in aggregate for full time employees as well as aggregated contractor payments.

As Founder / CEO, I received no salary in 2020 from the Foundation. I did, however, begin vesting tokens from June 1, 2020 when the Foundation was established. Like all other foundation employees, these tokens were subject to cliff and quarterly vesting. I began earning a salary in 2021, and by December 2021, I had vested a portion of my tokens.

Around this time, I located an opportunity for an OTC sale of SCRT tokens. Instead of paying out my vested tokens in December 2021, I converted my vested portion of tokens to USD at the OTC price and Secret Foundation distributed these funds as a dividend. The amount of tokens vested was 375,000 SCRT. The amount of the dividend distribution was $2.625M, which is the OTC price of $7 multiplied by the tokens vested. This information is verifiable in our 2021 tax filings, which have been previously reviewed by Labs, and I have previously disclosed this information to them.

I believe the Foundation has always acted, and will always act, in accordance with its stated mission: to grow the global adoption of open-source privacy technologies and to help support and sustain the Secret ecosystem. That said, the time has come for change. I have communicated privately and publicly on multiple occasions about my desire to be a part of that change, which could include restructuring the Foundation entity, more closely supporting Secret Agency, establishing a global board, or other next steps. We firmly support this path and wish to work in close coordination with other network actors.

I explicitly acknowledge that for the Foundation (or any similar or related entity) to succeed and be trusted going forward, there must be standards set concerning reporting, compensation, transparency, and adjusting other aspects of the Foundation’s operation. It is my primary focus at this time. I hope we can come together as a community and continue that work with an understanding that it is a universally shared mission.

Tor

2 Likes
2

Hello Tor Bear. Can you please respond to allegations that you used community funds to trade (gamble) as an effort to recoup community funds that you lost during an OTC scam? Thank you.

1 Like
3

This allegation is false. We’ve previously published our disclosure on that event and it is available on this forum.

4

scrt1032
scrt1032862×352 196 KB

1 Like
5

What was market price at time or your OTC quote? How does it compare to other offers you gave out in the foundations past and what lock up periods did those have? Were you or any family members ever involved in other OTC deals?

6

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 guys post here, 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.

7

That sure was alot of words Tor. Without any real substance. Since screwing up you have had plenty of time to learn from your mistakes yet you continue gas lighting like the power went out. Sad. Disappointing. Not surprising. Don’t drop the soap.

2 Likes
8

(Posting this here as well, because the topic is split over multiple threads)

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.

2 Likes
9

ask yourselves: if price were above 7$ would this be less of an issue? Likely.
Moving forward, please disclose all vesting/lockup… just anything held in foundation wallets whatsoever and manifest a rule: we - the foundation - commit to full transparency, which means yada…

Overall ~3MUsd aint the world, we chasing billion networks folks.

2 Likes
10

So if price was higher that justifies fraud? The rule you’re suggesting was manifested already with prop 103.

1 Like
11

@tor unfortunately there has been a loss in confidence about the stewardship of community funds. The Secret Foundation funds were acquired by taking a percentage from active stakers and given those funds to the Secret Foundation. The intended use of the funds was for community development and to be used with complete transparency. However, many questions are still left unanswered and until the questions can be honestly answered I recommend that you step down and transition the remaining Secret Foundation funds to a trusted community member. If everything is above reproach, then you should have nothing to worry about and encourage this course of action. Refusal to comply with a simple request further adds to the lack of trust and accountability.

12

Exactly, personally I think it would be best to transfer the resources to a community pool that is managed directly by the SCRT trackers, in the long run we need to avoid any trust and convert all mechanisms to some degree of onchain so that the community can decide :slight_smile:

13

Finally back from international travel, so I can begin responding a bit more proactively on the Forum. Here responding to Ranger:

The market price at the time of this sale was ~10% above the agreed upon OTC price. That is to say, this OTC price was agreed to at a discount to the market. The lockup was agreed to be six months (i.e. the tokens could not be re-sold). If the tokens were sold openly on market, a higher price would have been realized. The Foundation has never sold tokens on the open market - only OTC - and this has been our policy since inception.

Typically any Foundation OTC deals were done with small discounts (0-10%) and small lockups (0-6 months). The proceeds from this OTC deal that were retained by the Foundation were previously disclosed in our Q4 2021 report. As mentioned in the disclosure, our policy was to not include employee token compensation in our reports.

The facts are above and not in dispute:

I located an opportunity for an OTC sale of SCRT tokens. Instead of paying out my vested tokens in December 2021, I converted my vested portion of tokens to USD at the OTC price and Secret Foundation distributed these funds as a dividend. The amount of tokens vested was 375,000 SCRT. The amount of the dividend distribution was $2.625M, which is the OTC price of $7 multiplied by the tokens vested. This information is verifiable in our 2021 tax filings, which have been previously reviewed by Labs, and I have previously disclosed this information to them.

I don’t understand the last question as asked. My family members do not have vested tokens. They are not owners of the Foundation. They have not ever taken payments or distributions. They have not been involved in OTC deals.

My compensation since beginning at the Foundation has only been in the form of salary and dividend payments representing the cash value of vested tokens. I personally have never received SCRT tokens from the Foundation. This is verifiable in our filings and accounting. I do have personal holdings of SCRT outside the Foundation, some of which I purchased with my own funds on the open market.

I have consulted many experienced industry professionals outside our ecosystem both before and after this disclosure was made. They have agreed with me that the actions disclosed in this thread were not unethical or illegal, and in my reading, SCRT Labs has certainly not indicated in their disclosure or statements that they feel anything illegal was done.

Again, what is important to me is the path forward. It is very understandable if community members feel these past policies and systems cannot be the future of our ecosystem, and as stated above:

the time has come for change. I have communicated privately and publicly on multiple occasions about my desire to be a part of that change, which could include restructuring the Foundation entity, more closely supporting Secret Agency, establishing a global board, or other next steps. We firmly support this path and wish to work in close coordination with other network actors.

I am aware of proposals for paths forward and will be reviewing them with our legal team, employees, and other stakeholders during this week.

2 Likes
14

Why was your vested but not claimed SCRT realised as a dividend is my only question?

Other employees with tokens that realise will not receive it as a dividend so why was this treated differently?

15

This is not an uncommon practice, and it was a recommended policy internally.

It would have been possible to first distribute the tokens personally, then split the OTC deal into two transactions. However, this was not the policy that had been recommended, and the OTC counterparty wished to proceed in a single transaction.

16

Hey @tor , thanks this was very helpful.
Regarding the restructure, once you’ve discussed everything will you make a thread where we could discuss the various options? I think these things shouldn’t be kept private, they should be handled by the whole community.

17

My understanding is that the proposal that’s been presented to me will not be private much longer, but it’s not for me to share at this time. I believe it will be shared by the people who composed the proposal.

1 Like
18

For what it’s worth, I still trust Tor and believe Secret Foundation to be an entity that has the best intentions for Secret Network. Secret Network is Tor’s passion and I simply don’t see him as someone who would willingly toss aside his reputation for profit.

In the past two years, we have seen the Foundation grow in size to successfully support sponsoring events at larger conferences and consistently maintain social presence. Events and speaking opportunities at conferences and on podcasts have brought attention and awareness to the network (sometimes hard to quantify). Even in the bear market, the Secret Summit was well organized and helped bolster our branding to keep us in collaboration with privacy alliances across the Web3 space. The team has put in a lot of work, despite all of backlash that the Foundation continues to receive and I feel they are often underappreciated. They were also instrumental in setting up the community committee structure from inception that has organically led to many of the leaders in the network today.

At least for me, it has always been clear that Secret Foundation would be the primary contact for OTC deals for our network. I have no legal background and not sure how much transparency theses deals typically warrant. I understand one of these deals turned out to be a scam that used social engineering to bypass OTC policies. The lack of transparency was a decision made to protect a community member and has since been brought to light. Ultimately the Foundation is still responsible for the networks funds, but I believe they deserve a second chance to earn back trust from lessons learned.

Not sure how I feel about the vesting tokens scenario and will wait for more information as it’s shared. I want Foundation team members to be paid appropriately, and I hope people in our community can cash in on their hard efforts during bull markets - that’s what we are here for. This seems like another area for improvement in transparency.

I am glad the Foundation is working with Secret Labs to share financial details, but equally concerned with their response. Seems like there are some questions still remained unanswered highlighted in SLABs forum post (esp regarding allegations concerning Alameda). However I hold Tor by his word if he’s saying certain events have not occured, and I personallyI do not plan to jump to conclusions or make judgements until proof shows otherwise.

I support the Foundations initiative to lower tax to 0% in the meantime to give the team time to find it’s footing and earn back community trust. They have expressed their willingness to listen to the community and identify better processes for the future.

Please don’t hold this stance against me as it’s based solely on my hope that decisions were made with good intentions and a personal desire not to point fingers until proof is provided.

4 Likes
19

Since my arrival at the Foundation and Network, I’ve seen incredible synergy and mission alignment growth. We, as a network, have enjoyed trackable increases in engagement internally as well as externally.

I can only speak on the Marketing / Events side, and where we are today compared to this time last year is truly night and day. This is a testament to the newly structured Agency and committee allocation of personnel/resources and how we (the Foundation) are working with them to support as many global initiatives as possible. There’s always room to grow, of course, but we’re most certainly on the right track. This growth is independent of any issues or concerns stemming from updates and disclosures stated above and in other threads.

I look forward to future growth and cooler heads prevailing in the days and weeks to come. We are only going to get better and stronger. The key to this success is solidarity in both mission and ethos.

5 Likes