Cosmos Validators SmartStake and NotionalDAO Shut Down Nodes Amid Secret Network Founder Controversy

The Cosmos ecosystem is facing turbulence as prominent validator SmartStake has announced the shutdown of its nodes. This significant move comes in the wake of serious allegations leveled against Tor Bair, the founder of the Secret Foundation, stirring unrest within the Secret Network community. Let’s dive into the details of this developing story and understand its implications for the Cosmos and Secret Network.

Why are Cosmos Validators Shutting Down?

SmartStake, a well-known validator within the Cosmos ecosystem, cited a combination of factors leading to their decision to discontinue their services. These reasons, as stated by SmartStake, include:

• Complex and Stressful Validator Operations: Running validator nodes in today’s dynamic blockchain environment is no easy feat. It demands constant vigilance, technical expertise, and robust infrastructure.
• Cost and Effort of Validator Operations: The financial and resource investment required to maintain high-performance validator operations can be substantial.
• Recent Events: This alludes to the unfolding controversy surrounding Tor Bair and the Secret Foundation, which seems to be the tipping point for SmartStake’s decision.

In their official statement, SmartStake reassured delegates that the shutdown would be executed gracefully, ensuring no penalties or ‘slashing’ for those who had staked their assets with them. This demonstrates a commitment to their community even as they step away from validating.

“Please note that the shutdown will be graceful and there will be no slashing for any of the delegates.”

Adding to the impact, NotionalDAO, another respected Cosmos validator, declared solidarity with SmartStake. Jacob Gadikian, CEO of NotionalDAO, confirmed their decision to not reactivate their node, further amplifying the concerns within the Cosmos ecosystem.

What are the Allegations Against Tor Bair?

The controversy stems from public accusations made on January 27th by Guy Zyskind, the founder of Secret Labs, within the Secret Foundation’s governance forum. Zyskind’s statement brought to light serious concerns regarding the financial activities of the Secret Foundation under Tor Bair’s leadership.

Here are the key allegations:

• Undisclosed Token Sales: Zyskind claimed that the Secret Foundation engaged in the sale of a significant amount of SCRT tokens, the native cryptocurrency of Secret Network, worth millions of USD.
• Personal Profit and Dividends: A substantial portion of the funds generated from these token sales was allegedly distributed to Tor Bair as a ‘dividend.’ This payout, amounting to over $4 million in Q4 2021 alone, was not publicly disclosed.

Zyskind’s Proposed Solution: A New Direction for Secret Network

In response to these revelations, Guy Zyskind proposed a significant restructuring of the Secret Foundation. His solution centers around disbanding the current foundation and establishing a new entity with a focus on transparency and community governance.

The proposed changes include:

• Decentralization of Stakes: Redistributing the foundation’s stakes to the community, fostering greater decentralization and community control.
• Creation of a New Foundation: Forming a new foundation under fresh leadership, aiming to rebuild trust and ensure ethical governance.
• Public and Audited Operations: The new foundation would commit to transparent operations, with publicly available audits of its activities.
• Annual Funding Proposals: Moving towards a system of annual funding proposals presented to the community, outlining budgets, milestones, and specific needs for Secret Network’s development.

Despite the seriousness of the allegations, Zyskind’s message concluded on an optimistic note, expressing confidence in the Secret Network community’s ability to navigate these challenges and emerge stronger. He emphasized the potential for the restructuring to propel the platform towards its ‘Secret 2.0 vision.’

“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. “

Tor Bair’s Defense: Vested Tokens and OTC Sales

In the same governance meeting, Tor Bair addressed the allegations, providing his perspective on the withdrawals. He stated that the funds in question were derived from a portion of his vested tokens.

Bair’s key points of defense included:

• Salary and Vesting: He clarified that he began receiving a salary in 2021 and that a fraction of his tokens were set to vest in December of that year.
• OTC Token Sale: Bair confirmed an over-the-counter (OTC) sale of SCRT tokens, converting them to USD stablecoins. These stablecoins were then deposited with the foundation to facilitate his dividend payout.
• Disclosure to Labs: He asserted that this information was documented in the 2021 tax filings of the Secret Foundation, which had been reviewed by Secret Labs, and that he had previously disclosed this information to them.
• Token Holdings and Payout: Bair stated that he possessed 375,000 vested SCRT tokens and received a payout of $2.625 million.

“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.”

Despite defending his actions, Bair acknowledged the need for change within the Secret Network, indicating a willingness to be part of a transformation process.

“the time has come for change,” despite the fact that he has “communicated individually and publicly on several times about my desire to be a part of that transformation.”

Responding directly to Zyskind’s claims of undisclosed activities, Bair refuted the allegation as false, pointing to prior disclosures on the forum.

“This allegation is false. We’ve previously published our disclosure on that event, which is available on this forum.”

Community Reaction and Market Impact

The unfolding controversy has ignited a heated debate within the Secret Network community, extending across governance forums and social media platforms like Twitter. The central point of contention revolves around whether Bair’s actions constitute malpractice or if the community’s concern is primarily driven by the fact that the token sale appears to have occurred near SCRT’s market peak.

Adding to the pressure, the price of SCRT has taken a significant hit. Currently trading at around $0.80, SCRT is over 90% down from its peak value around the time of Bair’s token sale. This market downturn further amplifies the community’s anxieties and underscores the gravity of the situation.

What’s Next for Secret Network and Cosmos?

The situation remains fluid, and the future direction of the Secret Network hinges on how the community and stakeholders navigate these challenges. Key questions that remain include:

• Will the community accept Zyskind’s proposed restructuring?
• How will the new foundation be structured and governed?
• Can Secret Network regain community trust and rebuild its reputation?
• What will be the long-term impact on the price of SCRT and the overall Cosmos ecosystem?

The coming weeks and months will be crucial for the Secret Network as it seeks to address these allegations, implement changes, and chart a course towards a more transparent and community-driven future. The decisions made now will undoubtedly shape the trajectory of Secret Network and potentially influence broader discussions around governance and accountability within the crypto space.