Mar 18, 2019
Altcoin Magazine: Who to Blame for the Bankruptcy of the NEM Foundation and What to Do Next?
The NEM Foundation, which was on the verge of bankruptcy in early 2019, survived. The crypto community allocated $7.5 million to save it, but it’s too early to put an end to this story.
At the beginning of the year, the NEM Foundation admitted that their condition was extremely deplorable, and the “previous management” brought to it. Allegedly, the ex-managers were doing nothing at all with what they needed, and in addition, they were wasting a lot of money. As a result, the company has only resources left for one month of existence.
The main goal of the NEM Foundation and similar organizations is to popularize and use blockchain technology as widely as possible.
The new managers, led by the next president, Alex Tinsman, decided to save the situation. But their efforts were not enough, and the NEM Foundation asked the community for $7.5 million to fund the activities. Cryptoenthusiasts responded and allocated tokens to rescue the organization.
NEM cryptocurrency appeared in 2015. Two years later, a group of active community members created the NEM Foundation organization. Its main goal was to promote its own blockchain, as well as cryptocurrency in general. They led the NEM Foundation, which in the future and brought upon the community’s disfavor, and accusations from the management of the organization.
But at first, everything went well. NEM Foundation has built an extensive network of offices around the world. More than 150 people in 20 countries worked on the development of cryptocurrency.
But in 2018 the situation changed. Bears seized the market, and the price of cryptocurrency collapsed. The XEM token, in turn, fell from a peak of $2.09 to the current $0.05. In addition, in January 2018, hackers attacked the Coincheck cryptobirth, with which they stole 523 million NEM coins, which is about $26 million at current prices.
Of course, NEM representatives did not see their fault in what had happened. Like, the breach was on the side of the exchange, and not the cryptocurrency itself. But the “sediment” of the crypto community remained.
Whatever it was, the whole industry began to rebuild and prepare for a long “cryptozime.” And in such a period, money is needed more than ever.
By December 2018, the board of directors of the NEM Foundation decided that the then managers did not value “every penny” at all.
According to the organization, the ex-leadership spent 9 million XEM per month, which is about $45,000 at current prices.
“It could not seem so serious a problem when the price of the XEM was high. But this is a very big problem for a sustainable organization in cryptozyme,” they commented.
In addition, the problem was aggravated by the fact that the organization has almost no money.
“We realized that we only had money left for one month because of bad management,” said Alex Tinsman, the newly elected president of the NEM Foundation.
In total, according to her, the ex-management spent 80 million XEM or $4 million in the current equivalent from December 2017 to January 2019. And most of this money went to marketing. In particular, on the promotion of development called Catapult. A product that should appear only by the end of this year.
“The main complaints against the NEM Foundation were rather that instead of active development, the foundation invested more in marketing products that were not actually there yet,” said Alexander Bespalov, board member of the National Association of Blockchain.
The same opinion is shared by the newly elected president of the NEM Foundation Alex Tinsman. Like, it makes no sense to advertise a product that is not yet on the market, and therefore marketing activity should be reduced.
But there is another nuance. Some community members accuse ex-President Long Von of using the organization for personal gain. Allegedly, he was engaged in the promotion of two ICO: ProximaX and Ecobit. And in ProximaX Vaughn is listed as CEO.
“Of course, such collective funds are initially focused on the development of a particular system and technology. Personal enrichment of managers of such funds is still an exception, not a common practice. We need to understand that such structures are often created by enthusiastic developers, and not by financiers and entrepreneurs, unlike investment funds,” says Alexander Bespalov.
The NEM Foundation did not confirm but also did not deny, whether Vaughn used his position to promote third-party projects. But she said that he left the post in April 2018 and “focused on the ProximaX project.”
“Such organizations, in most cases, are an absolute blessing for the industry. But, as practice shows, management forgets about the interests of the community. And this can hardly be called something illegal, or a violation of the law. Rather, it is necessary to define some category of morality,” says Alexey Pospekhov.
After Vaughn left, the management of the NEM Foundation temporarily passed into the hands of the board of directors. And in early 2019, Alex Tinsman took over the presidency and proposed a plan to save the organization.
The first point of her plan is to find money for activities. To do this, Tinsman appealed to the community and requested almost $7.5 million in XEM tokens from the NEM community fund.
And in order not to repeat the mistakes of ex-managers, Tinsman promised to carry out “work on the mistakes.” In particular, the NEM Foundation promises to cut costs by 60%, for which it was necessary to completely revise the structure.
Previously, the organization had an extensive network of representative offices in different countries that worked as separate, independent cells. Because of this, the management of cryptocurrency development, like the approaches themselves, was too different. Therefore, the NEM Foundation has promised to move to a new centralized business model.
In addition, the NEM Foundation has created a new position — Chief Revenue Officer. He will monitor the organization’s income and try to monetize its activities.
The NEM Foundation has also developed 7 more management positions to monitor the entire structure. In particular, the head of the financial department, the head of business development, etc. have appeared.
The organization also promised to submit a detailed development plan for 2019, and reports on the money spent, according to these goals.
The NEM Foundation also decided to “clean up” the ranks in order to cut costs. Most of the staff, or rather 100 people, have already said goodbye to the project, and some regional offices have closed.
NEM Foundation is not the only organization designed to promote cryptocurrency. Similar structures exist in both Ethereum and Bitcoin. Most often, they are engaged in the development of the blockchain and the popularization of cryptocurrency among business and customers.
“Such structures are necessary, but in order for them to work effectively, completely different representatives of the industry must be represented in them,” says Alexey Pospehov.
But such organizations must be as accountable and transparent as possible — that is, they are built on the same principles as the blockchain itself.
In the meantime, they, on the contrary, are sufficiently closed and it is not always clear what they are spending money on.
It is possible that the NEM Foundation will be an example of how to report for “every penny.” The only embarrassment is that for this the organization had to be on the verge of bankruptcy. And this could have been avoided if there were a system of checks and balances.
So it remains to hope that the crypto business can learn from mistakes.
Author: Marko Vidrih
