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Wonderland Crypto Co-Founder Revealed to Be Infamous Fraudster, Investors Shaken

120 points by Centigonal 5y ago

trhway 5y ago
>So, trust is an important element of that arrangement. you don't say...
b0sk 5y ago
I'm shocked! utterly shocked.. reading this totally unexpected news!
zamalek 5y ago
The trough of disillusionment is coming.
- api 5y ago
  Every time I think it's over it goes higher. Never underestimate human gullibility. Also don't forget that there are two huge use cases for this stuff that are not going away: money laundering and flight capital from authoritarian countries. Those use cases alone can drive this even higher.
  - rednerrus 5y ago
    Isn't this part of what real estate in Vancouver and NYC are for?
    - dcolkitt 5y ago
      Pretty hard to move a Vancouver house in a USB stick.
      - immibis 5y ago
        Just wait until the Tokenization Singularity...
      - rednerrus 5y ago
        This is a feature, not a bug.
  - steelstraw 5y ago
    And flight from debased fiat. A lot of currencies are inflating due to governments and central banks editing the money database. They can't edit the decentralized ledger and print more Bitcoin or lock you out. That aspect is increasingly appreciated.
    - zamalek 5y ago
      Inflation provisions liquidity. You're not going to buy shit if everyone HODLs: if nobody is willing to use the coin, how are you expected to sell for the coin? Currency losing value over time discourages hoarding that currency and doing nothing with it. Deflationary things are fixed assets, not currency. I would be more inclined to get behind a cryptocurrency that correlates liquidity with value.
      - dcolkitt 5y ago
        This is contradicted by the entire economic history of the 19th century, when the industrial economies all had robust growth/investment combined with long-term secular deflation. That's not to say there isn't an argument for inflationary currency. But that argument is centered around the ability to conduct counter-cyclical monetary policy to stabilize the business cycle. But it's silly to say that deflationary assets are literally impossible to serve as currency, because we have actual historical evidence of deflationary currencies.
      - api 5y ago
        > I would be more inclined to get behind a cryptocurrency that correlates liquidity with value. That could possibly be built. It's software defined money so it can do anything that can be expressed as a pure function of its state. You could probably make a Keynesian cryptocurrency that dropped money from helicopters when velocity was low, but it would be hard to design it so it wasn't easy to game via wash trading.
    - cateye 5y ago
      If you think governments are bad, wait until you see this: https://twitter.com/CryptoWhale/status/1487095816145801221?t=EJ6oopxlUSVQb3dQ_wikVg&s=19 https://twitter.com/CryptoWhale/status/1487095816145801221?t...
  - zamalek 5y ago
    We're far less intelligent than we think, as a species.
- rchaud 5y ago
  Not as long as the crest of greed is greater than the trough of loss.
dbg31415 5y ago
Crypto is a pyramid scheme?! Nobody could have seen this coming!
- SparkyMcUnicorn 5y ago
  If you can explain how cryptocurrencies like BTC or ETH are a pyramid scheme while stocks like AAPL or TSLA aren't, I'd love to hear it.
  - astrange 5y ago
    AAPL pays dividends in another currency. TSLA theoretically could, plus they can repurchase shares anytime they want. (Or issue new ones, since their shareholders seem desperate to give them money.)
    - SparkyMcUnicorn 5y ago
      Just like some cryptocurrencies (yes, some pay in something other than what you're holding). And some of them are even deflationary. Some cryptocurrencies buy and and burn, others have a DAO that buys assets and holds the assets in a treasury.
      - astrange 5y ago
        I agree that since you can reproduce all tradfi structures as cryptocurrencies, that means some cryptocurrencies aren't scams. But if so, they might be unregistered securities.
  - Centigonal 5y ago
    I would argue that, while both crypto and stocks are speculative assets whose value continues to grow due to greater fool theory, stocks either pay dividends or come with the expectation of eventually paying dividends. This means at least part of the value of a share of stock can be accounted for as the summed present value of all future dividends from that share. Most crypto assets don't pay dividends, and those that do usually pay by devaluing the currency through some staking scheme, instead of by extracting profit by selling something valuable to people. Given those premises, I'd argue that stocks like AAPL or TSLA are part speculative asset (what you're calling a Ponzi scheme), while most crypto is all speculative asset.
ceejayoz 5y ago
> I am of the opinion of giving second chances... OK, but this was #3.
freitasm 5y ago
Cryptocurrencies are a scammer's dream? Nah...
rednerrus 5y ago
I would be more shocked if they weren't a fraudster.
- deleted 5y ago
  [deleted]
woodruffw 5y ago
I don't know whether it was an oversight on their part, but Vice fails to mention that "Michael Patryn" also isn't his original name: it's Omar Dhanani[1]. His federal criminal record runs back to 2004. [1]: https://amycastor.com/tag/michael-patryn/ https://amycastor.com/tag/michael-patryn/
- jimminy 5y ago
  It was mentioned in the third paragraph, just not expounded upon further. "Patryn, who changed his legal name twice, was the co-founder of QuadrigaCX, a Canadian exchange that shut down after Patryn's partner Gerald Cotten suddenly died in India in 2018 while owing users around $190 million in crypto at the time’s exchange rate."
  - woodruffw 5y ago
    Yep, that's the graf that made me look for his original name.
- j_walter 5y ago
  Go watch "Dead Man's Switch" on Netflix
  - codazoda 5y ago
    Looks like it’s on Discovery+ now.
  - woodruffw 5y ago
    Thanks for the recommendation!
CPLX 5y ago
Good to see that despite all the crypto skepticism the market is maturing and seasoned veterans of the sector are stepping into key roles. It's reassuring to see someone with deep and varied experience in the core crypto skillset of creating and scaling effective financial fraud. A welcome change from the inexperienced first generation.
cecida 5y ago
Just when you think that NFTs represent the worst of late-stage capitalism; you are reminded that defi is still a thing.
dcolkitt 5y ago
Just to give some context, Wonderland is not a blockchain or consensus layer. It's not even a legitimate DeFi app with a specific purpose (like Uniswap as an exchange or AAVE for lending). It's literally nothing more than an on-chain ponzi, with no other ostensible purpose than gathering a bunch of assets in its treasury and inflating its token price at some multiple to those assets. It's a form of OlympusDAO (the original flavor of this ponzi), that's designed to be even more leveraged and bubbly. All of the users of Wonderland literally called it a ponzi. 99% of users were consenting adults who knew exactly how the game worked, and chose to play anyway because they thought it was fun. They call themselves "the frog nation". Not one person in 1000 thought this was a legitimate or sustainable scheme. Some are acting like this is the crypto equivalent of finding out the CEO of a Wall Street bank is a convicted felon. It'd be more like finding out the CEO of an Atlantic City casino is.
- beambot 5y ago
  No horse in this race, but I do find the abstract idea of a purely on-chain digital reserve currency with community governance (i.e. Olympus DAO & offshoots) to be a fascinating idea. It's easy to point to early price fluctuations caused by speculation and yell "ponzi", but it's actually not dissimilar to the mechanisms & motivations that resulted in the first central banks (e.g. Bank of England) -- except that this time the benefactors are early adopters instead of the crown. Time will tell how this plays out. Keep in mind: The Central Bank of England was established in the late 1600s, but it wasn't until 1921(!) that the last bank stopped printing their own bank notes -- and some Irish & Scottish banks still today retain that authority given their charter.
- lilsoso 5y ago
  That's not quite accurate. Wonderland (TIME/MEMO) began as the first OHM-fork, however it was shifting into an actively managed investment fund. For example, there was a proposal for Dani to use Wonderland to takeover operational control of SushiSwap -- which recently had its own drama. Wonderland was shifting to a VC fund model, where Dani and Sifu would get early access to newly launching tokens and buy up seed rounds. Wonderland was just one of Dani's projects that all played into each other, including Popsicle Finance, Abracadabra, and the stablecoin project MIM. Dani is a charismatic, semi-anonymous founder who moves fast. Furthermore, the issue isn't so black and white. At its peak, Wonderland had a market cap of $2 billion. And it appears that Sifu was rather skilled at managing the funds. Apparently without him, there's no one else to manage the funds so the project will likely be wound down.
perihelions 5y ago
This thing has "investors", but it doesn't have fiduciary duties to disclose material risks to said investors? Risks such as "our co-founder is a serial fraudster"? I don't understand how regulators have collectively dropped the ball so hard on this.
- wmf 5y ago
  The SEC will probably start investigating Wonderland in 2023 and they may issue a fine in 2025.
- tim333 5y ago
  That's what decentralized is all about. Which regulator will regulate it when it's spread across the globe with a bit in each country?
- rchaud 5y ago
  Disclosure? Fiduciary duties? These kinds of burdensome regulations are killing innovation in this country! /s
- immibis 5y ago
  "It" is a chunk of code on a blockchain. It can't follow regulations because it doesn't speak English. And it's not like there is a computer to seize, because it is a thousand computers independently running the same code.
tim333 5y ago
Their distributed governance actually seems to be working somewhat surprisingly >Welcome to the Wonderland Governance Forum!... >[WIP #4] - Wind down Wonderland, and give the treasury back to its holders >The Sifu vote is coming close to an end, currently the vote stands at 86% to remove Sifu. The team feels strongly that this is the best choice for the protocol and it needs to happen as a first step to move forward with Wonderland. https://twitter.com/Wonderland_fi/status/1487175603296116740 https://twitter.com/Wonderland_fi/status/1487175603296116740 I wonder if Sifu/Patryn/Dhanani will get some grief from law enforcement over the 15,000 eth he seems to have from Quadriga, the bankrupt Canadian exchange he co-founded?
amatecha 5y ago
I recently watched a documentary about Charles Ponzi and I kept thinking over and over, "this sounds like cryptocurrency hype". This guy would have absolutely loved NFTs and "DeFi".

120 points by Centigonal 5y ago

trhway 5y ago

>So, trust is an important element of that arrangement. you don't say...

b0sk 5y ago

I'm shocked! utterly shocked.. reading this totally unexpected news!

zamalek 5y ago

The trough of disillusionment is coming.

api 5y ago
Every time I think it's over it goes higher. Never underestimate human gullibility. Also don't forget that there are two huge use cases for this stuff that are not going away: money laundering and flight capital from authoritarian countries. Those use cases alone can drive this even higher.
- rednerrus 5y ago
  Isn't this part of what real estate in Vancouver and NYC are for?
  - dcolkitt 5y ago
    Pretty hard to move a Vancouver house in a USB stick.
    - immibis 5y ago
      Just wait until the Tokenization Singularity...
    - rednerrus 5y ago
      This is a feature, not a bug.
- steelstraw 5y ago
  And flight from debased fiat. A lot of currencies are inflating due to governments and central banks editing the money database. They can't edit the decentralized ledger and print more Bitcoin or lock you out. That aspect is increasingly appreciated.
  - zamalek 5y ago
    Inflation provisions liquidity. You're not going to buy shit if everyone HODLs: if nobody is willing to use the coin, how are you expected to sell for the coin? Currency losing value over time discourages hoarding that currency and doing nothing with it. Deflationary things are fixed assets, not currency. I would be more inclined to get behind a cryptocurrency that correlates liquidity with value.
    - dcolkitt 5y ago
      This is contradicted by the entire economic history of the 19th century, when the industrial economies all had robust growth/investment combined with long-term secular deflation. That's not to say there isn't an argument for inflationary currency. But that argument is centered around the ability to conduct counter-cyclical monetary policy to stabilize the business cycle. But it's silly to say that deflationary assets are literally impossible to serve as currency, because we have actual historical evidence of deflationary currencies.
    - api 5y ago
      > I would be more inclined to get behind a cryptocurrency that correlates liquidity with value. That could possibly be built. It's software defined money so it can do anything that can be expressed as a pure function of its state. You could probably make a Keynesian cryptocurrency that dropped money from helicopters when velocity was low, but it would be hard to design it so it wasn't easy to game via wash trading.
  - cateye 5y ago
    If you think governments are bad, wait until you see this: https://twitter.com/CryptoWhale/status/1487095816145801221?t=EJ6oopxlUSVQb3dQ_wikVg&s=19 https://twitter.com/CryptoWhale/status/1487095816145801221?t...
- zamalek 5y ago
  We're far less intelligent than we think, as a species.
rchaud 5y ago
Not as long as the crest of greed is greater than the trough of loss.

dbg31415 5y ago

Crypto is a pyramid scheme?! Nobody could have seen this coming!

SparkyMcUnicorn 5y ago
If you can explain how cryptocurrencies like BTC or ETH are a pyramid scheme while stocks like AAPL or TSLA aren't, I'd love to hear it.
- astrange 5y ago
  AAPL pays dividends in another currency. TSLA theoretically could, plus they can repurchase shares anytime they want. (Or issue new ones, since their shareholders seem desperate to give them money.)
  - SparkyMcUnicorn 5y ago
    Just like some cryptocurrencies (yes, some pay in something other than what you're holding). And some of them are even deflationary. Some cryptocurrencies buy and and burn, others have a DAO that buys assets and holds the assets in a treasury.
    - astrange 5y ago
      I agree that since you can reproduce all tradfi structures as cryptocurrencies, that means some cryptocurrencies aren't scams. But if so, they might be unregistered securities.
- Centigonal 5y ago
  I would argue that, while both crypto and stocks are speculative assets whose value continues to grow due to greater fool theory, stocks either pay dividends or come with the expectation of eventually paying dividends. This means at least part of the value of a share of stock can be accounted for as the summed present value of all future dividends from that share. Most crypto assets don't pay dividends, and those that do usually pay by devaluing the currency through some staking scheme, instead of by extracting profit by selling something valuable to people. Given those premises, I'd argue that stocks like AAPL or TSLA are part speculative asset (what you're calling a Ponzi scheme), while most crypto is all speculative asset.

ceejayoz 5y ago

> I am of the opinion of giving second chances... OK, but this was #3.

freitasm 5y ago

Cryptocurrencies are a scammer's dream? Nah...

rednerrus 5y ago

I would be more shocked if they weren't a fraudster.

deleted 5y ago
[deleted]

woodruffw 5y ago

I don't know whether it was an oversight on their part, but Vice fails to mention that "Michael Patryn" also isn't his original name: it's Omar Dhanani[1]. His federal criminal record runs back to 2004. [1]: https://amycastor.com/tag/michael-patryn/ https://amycastor.com/tag/michael-patryn/

jimminy 5y ago
It was mentioned in the third paragraph, just not expounded upon further. "Patryn, who changed his legal name twice, was the co-founder of QuadrigaCX, a Canadian exchange that shut down after Patryn's partner Gerald Cotten suddenly died in India in 2018 while owing users around $190 million in crypto at the time’s exchange rate."
- woodruffw 5y ago
  Yep, that's the graf that made me look for his original name.
j_walter 5y ago
Go watch "Dead Man's Switch" on Netflix
- codazoda 5y ago
  Looks like it’s on Discovery+ now.
- woodruffw 5y ago
  Thanks for the recommendation!

CPLX 5y ago

Good to see that despite all the crypto skepticism the market is maturing and seasoned veterans of the sector are stepping into key roles. It's reassuring to see someone with deep and varied experience in the core crypto skillset of creating and scaling effective financial fraud. A welcome change from the inexperienced first generation.

cecida 5y ago

Just when you think that NFTs represent the worst of late-stage capitalism; you are reminded that defi is still a thing.

dcolkitt 5y ago

Just to give some context, Wonderland is not a blockchain or consensus layer. It's not even a legitimate DeFi app with a specific purpose (like Uniswap as an exchange or AAVE for lending). It's literally nothing more than an on-chain ponzi, with no other ostensible purpose than gathering a bunch of assets in its treasury and inflating its token price at some multiple to those assets. It's a form of OlympusDAO (the original flavor of this ponzi), that's designed to be even more leveraged and bubbly. All of the users of Wonderland literally called it a ponzi. 99% of users were consenting adults who knew exactly how the game worked, and chose to play anyway because they thought it was fun. They call themselves "the frog nation". Not one person in 1000 thought this was a legitimate or sustainable scheme. Some are acting like this is the crypto equivalent of finding out the CEO of a Wall Street bank is a convicted felon. It'd be more like finding out the CEO of an Atlantic City casino is.

beambot 5y ago
No horse in this race, but I do find the abstract idea of a purely on-chain digital reserve currency with community governance (i.e. Olympus DAO & offshoots) to be a fascinating idea. It's easy to point to early price fluctuations caused by speculation and yell "ponzi", but it's actually not dissimilar to the mechanisms & motivations that resulted in the first central banks (e.g. Bank of England) -- except that this time the benefactors are early adopters instead of the crown. Time will tell how this plays out. Keep in mind: The Central Bank of England was established in the late 1600s, but it wasn't until 1921(!) that the last bank stopped printing their own bank notes -- and some Irish & Scottish banks still today retain that authority given their charter.
lilsoso 5y ago
That's not quite accurate. Wonderland (TIME/MEMO) began as the first OHM-fork, however it was shifting into an actively managed investment fund. For example, there was a proposal for Dani to use Wonderland to takeover operational control of SushiSwap -- which recently had its own drama. Wonderland was shifting to a VC fund model, where Dani and Sifu would get early access to newly launching tokens and buy up seed rounds. Wonderland was just one of Dani's projects that all played into each other, including Popsicle Finance, Abracadabra, and the stablecoin project MIM. Dani is a charismatic, semi-anonymous founder who moves fast. Furthermore, the issue isn't so black and white. At its peak, Wonderland had a market cap of $2 billion. And it appears that Sifu was rather skilled at managing the funds. Apparently without him, there's no one else to manage the funds so the project will likely be wound down.

perihelions 5y ago

This thing has "investors", but it doesn't have fiduciary duties to disclose material risks to said investors? Risks such as "our co-founder is a serial fraudster"? I don't understand how regulators have collectively dropped the ball so hard on this.

wmf 5y ago
The SEC will probably start investigating Wonderland in 2023 and they may issue a fine in 2025.
tim333 5y ago
That's what decentralized is all about. Which regulator will regulate it when it's spread across the globe with a bit in each country?
rchaud 5y ago
Disclosure? Fiduciary duties? These kinds of burdensome regulations are killing innovation in this country! /s
immibis 5y ago
"It" is a chunk of code on a blockchain. It can't follow regulations because it doesn't speak English. And it's not like there is a computer to seize, because it is a thousand computers independently running the same code.

tim333 5y ago

Their distributed governance actually seems to be working somewhat surprisingly >Welcome to the Wonderland Governance Forum!... >[WIP #4] - Wind down Wonderland, and give the treasury back to its holders >The Sifu vote is coming close to an end, currently the vote stands at 86% to remove Sifu. The team feels strongly that this is the best choice for the protocol and it needs to happen as a first step to move forward with Wonderland. https://twitter.com/Wonderland_fi/status/1487175603296116740 https://twitter.com/Wonderland_fi/status/1487175603296116740 I wonder if Sifu/Patryn/Dhanani will get some grief from law enforcement over the 15,000 eth he seems to have from Quadriga, the bankrupt Canadian exchange he co-founded?

amatecha 5y ago

I recently watched a documentary about Charles Ponzi and I kept thinking over and over, "this sounds like cryptocurrency hype". This guy would have absolutely loved NFTs and "DeFi".