The RChain (RHOC) cryptocurrency is reportedly biting the dust
People are starting to use the word "scam" when describing the unusual decisions made at RChain.
RChain was solid on paper, topping out at about rank 30 on CoinMarketCap, and headed up by a big name team, perhaps most notably including Ethereum heavyweight Vlad Zamfir.
Where RChain went
RChain was envisioned as a highly-scalable next generation proof of stake smart contract and dapp platform, but now RHOC is on the rocks following a series of questionable decisions and serious allegations of financial mishandling, The Block reports.
In short, it's reportedly dead broke, building up a history of shady behaviour and hemorrhaging executives. Lead developer Medha Parlikar quit in October, alongside three board members including CFO Kate Gonsalves.
RChain CEO Greg Meredith said the treasury troubles were down to a combination of the crypto market downturn, and "poor management" by a third party financial adviser.
But investors are reportedly unconvinced, and there are rumours of legal action in the wings following allegations of outright financial mismanagement, including incomplete balance sheets and "reckless investments" including Meredith's purchase of a million dollar house.
The most outstanding investment was reportedly a $23.5 million purchase of a 5 year licence for an audio codec by Immersion Networks which would be used to help build the Rsong app. It's a stunning price tag given that RChain raised only $31 million. The transaction is said to have largely drained RChain's coffers while putting it about $15 million into debt.
"The tech is so compelling that artists are literally clamoring to get on," Meredith assured investors. Yet, three months after release there are still only three songs on the app.
Regardless of how it pans out the decision was simply irresponsible investors said to The Block.
"Even he manages to sell it, to have done it in the depths of the bear market, to take all your remaining funds, to take on debt, is irresponsible. They've killed the project," said one investor.
One of the most eyebrow-raising parts might be the rumours swirling around a highly unusual "backroom" deal between RChain and Pithia. The agreement was basically that RChain gives Pithia 105 million RHOC tokens, at a time when they were over $1 each, and Pithia provides various investment, marketing and development services.
The strange part is that the contract was renegotiated in August 2018 to add a clause saying that RChain had to launch a working mainnet blockchain by March 31 2019, otherwise Pithia was free to walk away from all its obligations and keep all the tokens.
The really strange part is that RChain then announced that its mainnet launch was rescheduled for 1 April 2019. At that point Pithia chose to exercise its right to walk away with all the money, and did exactly that.
The conclusion some investors came to was that the entire purpose of the deal was to simply pass a huge bag full of money to Pithia.
"My suspicion is that Greg [Meredith] was still a shareholder in Pithia when the deal was made," speculated one investor. "He had a huge influence over the delay, so it’s strange."
It's not clear what exactly Pithia is doing with these funds. Its wallet balance is down to 63 million RHOC, but only 11 million RHOC of spending has been accounted for. Sources told The Block that Meredith shut down their requests for a full audit of Pithia.
But credit where it's due, at least these shenanigans have been conducted quite transparently.
"If we're playing scam bingo, we'd have already hit a blackout," observed a disgruntled yet philosophical investor on Reddit. "Blockchains are hard enough to launch when you're putting everything you have into it. But when development is playing second fiddle to the primary goal of skimming off as much cash as you can, then you expect things to drag."
"I think this is what happens when you give blockchain founders too much money," suggested another investor.