MyEtherWallet & MyCrypto — the litigation story between Kosala “kvhnuke” Hemachandra and Taylor “tayvano” Monahan

So here I am, reading my daily news update, and I see tayvano’s post announcing she has left MEW (which apparently remains in kvhnuke’s control) and set up what appears to be a competing forked Ether wallet called MyCrypto. Kvhnuke has just responded with a statement on Reddit.

Neither of them is very forthcoming about the details of the split and why it happened but it is worth noting that:

1. Tayvano emphasizes how hard she worked on MEW in 2017, to the point of exhaustion, but pointedly says nothing about any work put in by kvhnuke. She only includes graphs of their respective code contributions over the years which appear to show that she has contributed significantly more code to MEW in the last couple of years. The implication is clear.
2. Kvhnuke confirms that the vast majority of the MEW team has left with Tayvano, but says that he cannot go into the reasons for the split and reassures everyone that MEW is functional and he is control of the code and product and it’s business as usual.

I thought I’d dig into this a little more, because every day at work I see that bad blood between co-founders often ends up in court, and lo and behold, here we have Kosala Hemachandra v Taylor Monahan & MyEtherWallet LLC, Case No. BS171730 in the Los Angeles County Superior Court (I downloaded the primary Petition in the case and put it on Dropbox for easy access here).

This could be interesting.

DISCLAIMER: I am qualified to practice law in England & Wales and India. I am not a California lawyer, and this is not legal advice, merely informed speculation by an experienced commercial litigator. I do not know kvhnuke or tayvano personally and have no connection with them or MEW. Also, this is being written on the day the news broke, based on the court documents I’ve seen and news from various online sources. Further developments could render this analysis invalid or out of date, as more information comes to light.

The Petition tells us a lot, but raises almost as many questions as it answers.

In essence, the case involves kvhnuke saying that all documents and financial records of the MyEtherWallet LLC company are in tayvano’s possession and that he is entitled to inspect them as a co-owner of the company, but she (according to him) is refusing to give him copies.

There is a hearing scheduled in the case for 27 March 2018, but since they have now split and the MEW company has been dissolved (see below), the case will probably go nowhere on this issue (unless kvhnuke never got the documents and wants them badly for some reason — for example, he may need them to pursue more litigation). However, all kinds of other issues relating to the split could get added to the case.

It looks like kvhnuke and tayvano haven’t been getting along for some time. The documents don’t shed light on the reasons for the breakdown in the relationship, but it isn’t hard to guess, based on tayvano’s post — she clearly feels he hasn’t been pulling his weight. We haven’t heard kvhnuke’s side of the story (except the part about her refusing to hand over documents he was entitled to see), but the fact that tayvano managed to convince most of the employees to go with her (and the evidence of the code contributions) suggests there is some weight to her story.

In any event, according to the documents, they appear to have been in negotiations as of October 2017, for tayvano to sell her share in MEW to kvhnuke for $1 million, which would leave him in sole control. In the course of the negotiations, kvhnuke felt (justifiably, IMHO) that it is difficult for him to commit to a purchase price without seeing all the accounting records and documents for the company, because he can’t conduct his due diligence on the company without them. Tayvano’s refusal (or more precisely, what appears to be inadequate production of documents) resulted in this case being filed.

Some more poking through company incorporation records in California shows that MyCrypto LLC was incorporated as far back as August 2017, which means tayvano has been planning this split for at least that long and probably a good deal longer.

It also shows that the MyEtherWallet LLC company has been dissolved — unilaterally by tayvano alone — as of 29 Dec 2017. Which begs the question — what company is kvhnuke running now? Who actually owns and operates MEW? It could certainly have been transferred to another company — but has it been? The website security certificate still says “MyEtherWallet LLC”.

We don’t know for sure of course, but I suspect that what happened is that negotiations for a buyout by kvhnuke and an amicable separation broke down. In connection with this, MyEtherWallet LLC has now been dissolved by tayvano (why?), and it looks like she has taken most of the employees and left to start a new company. Kvhnuke is left with control of the MEW software/codebase/brand and maybe a few employees (there appears to be a fight for control of the @myetherwallet Twitter account though), but since MyEtherWallet LLC has been dissolved, the legal status of all of these things is unclear.

However, as far as MEW’s functionality goes, no one’s crypto holdings should be affected. MEW (and now MyCrypto) is only a front-end for accessing the Ethereum blockchain and the blockchain itself is not affected by this (it’s like using different apps to access your Gmail account — your email stays in the same place, whatever app you use to access it). Also, the MEW codebase is public and any suspicious changes to the code etc will be easily spotted, so I am not worried about that aspect — only whether such a useful tool (now two) will survive and continue to get better.

I spy more litigation and stormy seas ahead (tayvano’s comment in her article that “MyEtherWallet will continue to be online until it, for whatever reason, is not online” may be a reference to current and potential litigation). I only hope the valuable service that MEW (and now MyCrypto) provides continues for the benefit of the wider crypto community.

UPDATE: It’s been pointed out on Reddit that it is inaccurate for me to say that tayvano dissolved MyEtherWallet LLC “unilaterally…alone”, because when you look at the relevant documents, the company appears to have had three members/shareholders, and two of them (tayvano and the third member) dissolved the company. This is factually correct, so I am updating this post to reflect that. I could have chosen my words better — I meant to say that tayvano appears to have dissolved the company without kvhnuke’s co-operation, and as far as we know, that appears to be true. I did not mean to imply that there were only two shareholders in the company or that tayvano was the only signatory to the dissolution.