Reporting in the 21st century is a hard job. With the 24-hour news cycle, journalists are expected to report accurate and relevant stories on strict deadlines, which can lead to less time for research. And sometimes, mistakes are made. Pithia strives to be helpful, honest, and transparent with reporters, but we understand that sometimes they simply don’t get the whole story right.
We want to clarify inaccuracies in a recent article about our relationship and business with RChain Co-op.
Here’s a timeline of how the relationship between the RChain Cooperative and Pithia (then RChain Holdings) evolved:
March 2017: Pithia (then RChain Holdings) and the RChain Cooperative signed an agreement.
Under the agreement, Holdings/Pithia purchased 105M RHOC tokens from the Co-op for a total of $5.25M, and a deferred payment plan was set up. At the time, RHOC prices were $0.05. This was not a loan from the Co-op.
There has always been an agreement between Holdings/Pithia and the Co-op that software would be delivered by certain dates with associated financial penalties. Under the first agreement, there were specific software deliverables as milestones and ecosystem development activities owed to Holdings/Pithia by the Co-op. A link to the agreement is provided at the end of this section.
January 2018: After internal discussion and reflection, RChain Holding’s founding CEO determined that he did not have the right team or corporate structure to build a fund. After a search and meeting several candidates, he chose to step down and bring Lawrence Lerner on as CEO to run the fund.
February 2018: Holdings was renamed Pithia and restructured to take investments. At that time, Pithia chose to renegotiate the March 2017 contract with RChain Cooperative (which had no expiration date) to allow the parties to continue to work together to build the ecosystem.
March 2018: Pithia took our first investment.
May 2018: Pithia repaid the full $5.25 million purchase price using RHOCs, which was an option specified in the current agreement. At that time, RHOCs were worth $1.64, and Pithia repaid 3,204,526 RHOCs to the Co-op, in full repayment of the deferred purchase price.
If you’re interested in reading both the original and renegotiated Strategic Partnership Agreement (SPA) with the RChain Cooperative, you can do so here.
Why Pithia Terminated the Contract with RChain
The Block article fixates on the inaccurate portrayal that we terminated our contract over a mainnet delay of one day. This is simply incorrect.
Some background. For every investment, Pithia applied a “meaningful use” provision in the contract. Here is a YouTube video of Lawrence explaining it during the RChain RCON 3 (September 2018) event. The provision required portfolio companies to use RChain in some non-trivial way by a certain date. The required software delivery timelines for each of the four companies was written into the contracts. Their due dates were based on the promised December 31, 2018 release of mainnet.
In the SPA, the committed and agreed upon delivery date for a commercially viable RChain mainnet was December 31, 2018. March 31, 2019 was the date by which Co-op had to cure technical problems which kept the product from being commercially viable.
In October 2018, we learned that the RChain mainnet was delayed until April 1, 2019. This new date was not a “one day” delay from the mainnet launch, it was three months.
When we learned that RChain would not deliver mainnet until April 1st, we had to release our portfolio companies from that portion of the agreement. We could not ask them to be idle for an additional three months. So, we exercised our termination rights.
Our full statement is publicly-available in the RChain Cooperative Discord channel and is posted in its entirety below:
After careful consideration, Pithia has determined it is in the better interest of our portfolio companies and business to terminate the August 13, 2018 Strategic Partnership Agreement with the RChain Cooperative. Several factors went into the decision, including the delay of platform delivery. Under the Agreement, Pithia was to fund a certain number of companies by a certain date, and the Cooperative was to provide a commercially viable platform by end of 2018. The Agreement further provided a March 31, 2019 deadline for the Cooperative to address technical issues in the platform. An email from Cooperative leadership confirmed that the platform would not be ready for launch until April 1, 2019.
Following the Cooperative’s confirmation of the delayed launch date, Pithia sent a letter to the Cooperative leadership and board indicating Pithia’s intent to terminate. The ten-day waiting period for termination provided under the Agreement ended on October 21st, at which time the Agreement terminates.
Agreements with our portfolio companies anticipated a marketable RChain platform significantly earlier than the new April 1, 2019 launch date anticipated by the Cooperative.
We remain supporters of the community and look forward to the release of the platform.
Where Are the RHOCs?
The article also painted an unfair picture of “backroom deals” and strongly alluded to mismanagement of the 105M RHOCs. Again, this is simply not true.
Holdings/Pithia’s sole source of funding were and still are the RHOCs it purchased from RChain Cooperative. In 2017, to build the ecosystem, Holdings used or liquidated its RHOCs to pay vendors (such as Holdings’ then law firm), marketing, salaries, office and other necessary business expenses. Pithia/Holdings is and always was a privately-held and separate company from the Co-op. Holdings purchased and owned the RHOCs after March 2017.
RHOCs did not trade on an exchange until October 2017, at which time they were $0.249. Prior to that they were much lower, starting at $0.05. During the seven months between March and October 2017, RHOCs were spent on the business expenses listed above, and the liquidation rate was dependent on the value of the RHOCs at the time.
As Pithia was restructured and we began to take investments, RHOCs were then used to build the RChain ecosystem by backing promising startups.
No backroom deals, no missing RHOCs. Pithia used or liquidated RHOCs for business expenses and for investments.
Pithia corresponded at some length with The Block reporter regarding these issues prior to publication of the article, but unfortunately, those messages were not fully reflected in The Block’s published article. For full transparency, you can see the entirety of our correspondence with The Block reporter by clicking the image below.
We hope this helps to clears up some of the inaccuracies regarding Pithia’s business from the recent article. We hold no ill will toward the reporters of the article and welcome a follow-up phone or email interview at any time. The most important thing to us is the community knows the truth.
Pithia is committed to continuing to identify and support entrepreneurs driving innovation in the blockchain ecosystem. If you have questions or would like to get in touch, please email firstname.lastname@example.org.