On Thursday, an Australia-based crypto investor Jason Liang filed a lawsuit against the co-founder of Olympus DAO, claiming that he was cheated out of an early fund of about 4 million in OHM tokens, which are now valued at more than $20 million. The lawsuit identifies a Connecticut resident as “Apollo” – Olympus’s pseudonymous co-founder.
OlympusDAO – What is it?
The Olympus DAO project, built on Ethereum, has been one of the most discussed – and controversial – ventures since it entered the Defi world in March 2021. It set out to use a combination of memes and game theory to build its own OHM token as a digital reserve currency, whose price notoriously plunged 95% this past winter. The OHM token is presently trading at $28, down from an October high of $1,300.
What is Olympus DAO? Source: CoinCulture
According to Liang, he paid $50,000 in DAI in a private funding round in return for 4 million pOHM, an OHM-based token used to bootstrap liquidity for the protocol. The deal was that later investors like Liang would be able to exchange 1 DAI and 1 pOHM for 1 OHM.
However, once he began selling his Olympus tokens, it turned out that the Olympus team tampered with smart contracts, which prevented him from redeeming pOHM for OHM. The Olympus team’s capacity to manipulate key smart contracts calls into question the project’s decentralised nature.
Liang’s legal team determined Apollo’s identity by doing a reverse phone lookup on a phone number Apollo used to contact Liang. The name behind the phone number corresponds to the one signed on the token purchase agreement, which states that funds received in the private funding round would be used to finance a corporation. However, it does not exist, and given the founders’ anonymity, it is more difficult for Liang to take legal action against the project.
Liang’s attorney, Joseph B. Evans, stated that there was a perfectly legal and appropriate method to administer a DAO. However, some organisations such as Olympus DAO tend to feel they can stay anonymous and dodge liability via fictitious entities, social media handles and screen identities. Liang provided much-needed funding to Olympus, and he was entitled to share in its success.
Is OlympusDAO a Ponzi scheme?
Is OlympusDAO a Ponzi scheme? Source: finance.yahoo
When Olympus DAO was launched, its distinctive bonding and staking mechanisms promised investors staggeringly huge returns in 10,000% annual percentage yield (APY). To ensure the system’s functionality, OHM holders were urged to interact with Olympus’s smart contracts following game theory principles “memefied” by the Olympus community.
“Hodling,” purchasing, and staking OHM would theoretically ensure that the whole community receives consistent, sky-high profits. Selling, as Liang did, was a sacrilegious act.
Although some vocal critics dismissed OlympusDAO as a Ponzi scheme, the DAO still managed to spur an entire “Defi 2.0” movement, encouraging popular spin-offs such as KlimaDAO and WonderlandDAO to jump in with their high-yield token systems.
While OlympusDAO has evolved to become one of the most popular Defi projects, its inventors – the pseudonymous “Zeus” and “Apollo” – have stayed anonymous, at least until now.
The pseudonymity of a project’s core founders is not uncommon in the realm of DAOs, as it is seen as a mechanism for a decentralised community to maintain meritocracy.
Liang’s lawsuit indicates how courts address the issue of jurisdiction over DAOs with pseudonymous and anonymous founders.