Blog 1

Milky's First Confirmed Rugpull

Date: January 12th 2023

 

Good afternoon to my fellow Pioneers!

Well, I wish it was a good for me.

Those of you who’ve read my recent monthly reports, and my end of year summary should note I’ve been suspicious of Apex for a couple of months. Last night a rugpull was officially confirmed!

R2D2 (Discord ID: R2D2#6465) had sacked Stallion in December due to his distractions with other projects he’s involved with on Hedera, namely LeemonSwap. R2D2 appointed himself CEO, made a number of promises, broke them all, and last night did this:

  • Shut down the Discord server
  • Deleted the main Twitter account
  • Liquidity started being drained at 20:05 CET on January 11th

This was a project I truly believed in. The ambition was astonishing, but achievable (if they had the right team in place). In the early days they were doing everything right and it looked like the world was their oyster. To those who haven’t seen the other articles I’ll highlight the planned verticals:

  • 10% of all Arweave Node Infrastructure
  • Decentralised Cloud, built on Arweave
  • NaaS (Nodes as a Service) Passive Income Model
    • ROI (return on investment) 80 days – if $APEX price stayed the same
    • Autocompounder function
    • Eventually sustained by revenue from the other verticals
  • Gen3 Decentralised Exchange (DEX) and Aggregator
  • Layer 2 Chain built on Avalanche C-Chain
  • Bridges (and DEX service) to Syscoin; Telos; Hedera Hashgraph; XRP & Fantom
  • Lending & Borrowing DeFi Perp Platform
  • Commercial and Advertising Space in Bloktopia

And other ecosystem partners provided the following services:

  • The world’s first insured Nodes, insured by Uno Re ($UNO)
  • The world’s first Nodes with embedded security, provided by Fort Knoxter ($FKX)
  • Certik Smart Contract Audit
  • Certik Bridge Audit
  • Certik KYC Audit

Who wouldn’t get excited? And all these partnerships and services were announced Q1-Q2 in 2022. Then something happened. A deal Tommy (the CEO of the time) tried to close in Turkey. Infamously known in the community thereon as the “Turkey Deal” (I'm still unclear what the nature of this deal was). The failure of this created a major backlash by a minority of members in Discord who went way too far. As a result the CEO stepped away, but did so without onboarding a replacement. So the project was left in the hands of the Chief Engineer “Stallion” in an unofficial leadership capacity. Unfortunately things went really bad from here:

  • Abandoned the roadmap
    • Between August and December 2022 all planned verticals barring the Gen3 DEX Aggregator & Apex Cloud was abandoned
  • Failed to pay Partners or Promoters
    • Such as refusing to pay Uno Re after the Partnership was announced
  • Went back on Agreements with ecosystem Partners
    • Such as contributing to Arweave’s infrastructure
  • Didn’t communicate with the community consistently or effectively
    • Alienated the community, leading to more questions which were never answered clearly
    • Rarely sent out public announcements to keep everyone informed
    • Deleted the public chat on Discord but kept the whale chat open
      • I sympathise a little with this, because at the time there was a lot of negativity. However I expected it to be a cool off period of maybe a week. But he never opened it back up.
  • Refused to update documentation to reflect new goals
  • The team seemed to lack direction, cohesiveness or accountability. Ad-hoc is the most appropriate term I think. Everyone seemed to be doing their own thing, their own way in their own time.
  • Refused to appoint a new CEO
    • He wanted a DAO, but as I pointed out to him, it wasn’t realistic at that stage. Maturity of verticals and ecosystem first, DAO later.
  • Poor social media marketing due to ignorance of blockchain communities
    • Unnecessarily aggressive campaign against potential competitor DEX’s, especially Trader Joe
  • Lack of personal focus
    • As the months went on it became clear Stallion’s heart or focus wasn’t on Apex anymore. Maybe the negativity became too much? But either way he seemed to become enthralled with the Hedera Tech and ecosystem, and became actively involved in a number of projects there.

Not everything was his fault though, the bridge builders they hired (Catoshi Nakamoto) failed to complete a single bridge. They made promises to Apex they couldn’t deliver on. And this is one of the Partnerships Apex actually paid for.

Then in the Autumn (Fall for you Americans) the DEX sustained DDOS (distributed denial of service) attacks. It kept the DEX down for an extended period whilst they sought to build a robust solution. Personally I thought it was a good thing. Better to suffer this now at this stage of development, than a year down the line when it should have been widely used, and the result would be a more robust and secure protocol. I also think this attack was a result of the social media marketing campaign which was ongoing at the time. It was a cringeworthy level of aggressive, in what is generally a friendly competitor space. At this time Crypto is supportive of other projects, even direct competitors. So this was against the sentiment or temperament of what would have been considered tolerable for the wider Crypto community.

After all the failures of Stallion’s unofficial stewardship, some of what was remaining of the team seemed to have enough. R2D2 took the reins, “sacked” Stallion and 2 other developers who were “deadweight” and declared himself the CEO. I reached out to him at this point, made some recommendations and offered my assistance for free. He ignored my message. Bear this in mind, I’m not a charity. I’ve worked damn hard to get to where I am. Initially taking almost no money for all the work I completed in my first 18 months. But by this point I had my business, my team and my own community. The services I was prepared to offer him would normally have cost around $10k. And he ignored it. I also asked him to disclose who the current team members were? What their roles were? When a new roadmap and whitepaper would be released? He refused. Combined, this worried me!

Otherwise when he started as CEO he made a number of promises, the foremost of which was improved communications with the community. He also did away with the second to last vertical from the original roadmap, the Apex Cloud built on Arweave. Completing the betrayal of promises and agreements with Arweave. He also extended the target time frame of launching v3 of the DEX until Q4 2023. Why so long? Is everyone going to spend their days drinking tea, playing games and doing the odd hour of work in the evening or morning? Or maybe he was sick of everyone (including me) of seeking a timeframe for completion. Maybe a classic case of under-promise/over-deliver to shut people up?

Initially his communication with the community started well, but very quickly dropped off again. By week 2 he’d already broken his promise of weekly announcements. Within a month he’d deleted the whale chat group on Discord. Now communication could only be one way, from Apex. One further announcement was made after this, simply saying “Be Kind”. And then nothing at all.

January 12th (today) I wake up to a plethora of messages from the Apex community asking me questions. After looking at the chart on CMC (coinmarketcap), verifying the Discord and Twitter had been deleted I knew what had happened. Rugpull!

Some members of the community have been calling it a rugpull since Tommy’s failed Turkey deal. Despite what has happened, and all the failures, I still don’t think this was a pre-mediated rugpull. I think this was a “Fuck it, it’s over anyway” kind of rugpull. But the timing is curious for me. In the last two weeks my criticism of Apex has been scathing, and rightly so. Whomever I spoke to, I’d always end along these lines…

“Even if they continue building, and eventually launch the v3 version of the DEX what is actually going to happen? They’ve betrayed their partnerships; failed to pay high profile promoters who would certainly warn any other promoter from working with them; completely alienated their community… So even if v3 is built how are they going to promote it? How are they going to convince projects to provide liquidity into it? How are they going to build a community who'll use it? They’ve committed suicide and don’t even realise it!”

That’s pretty close to exact quote actually. Maybe word of this reached back to them and opened their eyes? Maybe they now thought they were wasting their time and thought “fuck it”?

We’ll likely never know. But whatever the cause; Pre-meditated in a very clever slow rug, or reality hit they were wasting their time it doesn’t really matter. R2D2, zJerry and the others in the team still stole the liquidity. Stole from my pocket, and the pocket of every investor. And honestly, compared to most rugpulls I’ve seen the $ value would probably have been in the five figures, a paltry sum when taken into context with the usual rugpull. After paying themselves they wouldn’t have all that much left. Was it really worth becoming a permanent pariah and wanted men/women? The Americans have started prosecuting rugpulls, this will continue for many years as they catch up on the historical cases first. R2D2 and the others will have one eye over the shoulder for many years to come.

Reports have been filed with Certik. Certik will investigate but unfortunately none of the original 3 KYCd members of the team were still with it at the end. So it may be a dead end. But maybe not! There're some very skilled on-chain analysts out there! 

So fellow Pioneers, this was my first rugpull. Not the most pleasant of experiences I must admit (typical English understatement). But nor am I overly upset. Partly because I was sort of  anticipating this to happen, and the other part because I never invested more than I was willing to lose anyway. NaaS models were always the riskiest, because once in, you can’t get your investment back until the rewards are sustained long enough at a stable price. So even with my suspicions, what could I actually do?

Here’s the lessons to be learned:

  • No matter the promise, there is ALWAYS risk
  • Doxxed teams are more trustworthy than anon teams
  • Never invest more than you can afford to lose
  • Learn to walk away and move on
    • If it can happen to me, someone who prides himself on his fundamental research skills then it can happen to anyone. So if it happens to you, don't feel like you're stupid or worthless. Just remember the lessons, update your Risk Management strategy accordingly and move on
    • Onwards and upwards! There're always more opportunities!

If any of you who are affected by this, or any other rugpull and feel severe stress at this time please feel free to reach out to me. I’ll leave contact details below.

 As always, your Gem Hunter

Milky

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