The "disappearance" of billions of ADA from IOG

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I just read through @Colin_Edwards research on the case of Sundae Swap “Queue Jumping”. I enjoyed the read, and I thank you for the clarification!
Can we also please get an explanation regarding to the “disappearance” of Billions of ADA from IOG?
I am referring to these 2 Reddit posts.

Since IOG & EMURGO has a crucial role in developing this decentralized protocol, I firmly believe that transparency to the public is essential. While a privately held company has no obligation to disclose such information to the public and has the right to sell its assets at any time. It can be unethical to retail investors when entities that own an enormous amount of ADA dumps after the hypes of the Cardano summit. There is a reason why there are heavy regulations around the globe regarding stocks and insider trading.
Allegedly, someone asked Charles about this on Twitter, and he replied, “I have no comment on that.”
I have been a long-time holder of ADA, like many of you. I invested in ADA because I saw Charles’s passion for the project and his vision of changing the world. He is the only Founder (that I know of) in this space who does frequent AMAs, and I loved that openness, which is why some of us are concerned by this situation. Honestly, I don’t care what you guys did with those coins, but I believe we deserve at least an official clarification/reply from the IOG side.

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It’d be nice to see an answer from IOG regarding this post

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Hi, legal group? Some random forum poster that I have never met asked for my bosses birthday, any names of pets from childhood, his primary school and would like to know his top 10 investments and his credit card details. Can I post this on the forum, because it sounds like people really want to know?

As soon as they get back to me, will let you know.

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Huh, interesting. Instead of answering our actual concerns, an IOHK employee gave a very defensive and passive aggressive response. I not sure where this hostility is coming from?
If you read my post carefully, I am not asking for your home address or your pet’s name. I am simply asking a fair question that can impact many people’s lives.
Since you did just wrote an in-depth response regarding a “FUD” on IOG and your boss, I assume you or Charles cares about the public view of the project and the company.
Frankly, I am very surprised by this response. I wonder if this is the official response from the IOHK team? Or is it coming from your personal view @Colin_Edwards ?
Maybe you should consult your legal group before posting something that adds zero value to this conversation and may have a negative impact on your boss’s company.

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If my original post sounded like I dislike you guys or hating on Cardano. Let me be clear, I am not.
So no need to give this kind of response. We can all be civil and comunicate like adults…

I wouldn’t be surprised if IOG will just plainly ignore this thread and act like they saw nothing. I would like to just let the rest of you guys know that silence is a response. A rather strong one. Feel free to repost this on Reddit for more visibility.

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I would like to just let the rest of you guys know that silence is a response. A rather strong one.

No - it’s that I can not talk legally about company finances. It’s not a great secret or anything - but you are asking for information that everyone knows can’t be provided in a forum like this then come back pretending to be offended because someone is having a laugh at how bad your question is?

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Ah, the classic “it was just a joke!” while calling me a “random forum poster.” Not a very strong response in my option, but that’s fine. The point of this post is not to argue but to seek more clarity.
You said that you “can not talk legally about company finances.” Are you admitting that the actions of those huge transactions are indeed related to IOG?
Again everyone can read the comments and history of this post and the Reddit threads above. You may then come to your own conclusion on this situation.
I will be waiting patiently on a legit official response if we ever get one in the near future!

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I am not admitting or denying anything … although I believe that many of the things that are publicly available will answer your questions.

Cardano and Coinbase Enter Custody Partnership

Cardano has entered a custody agreement with major crypto exchange Coinbase , stating that near the end of the year, holders will be able to store their ADA in Coinbase’s cold storage, as well as stake their funds.

Charles Hoskinson, CEO of Cardano’s developer IOHK , has announced the news today, during the second day of the Cardano Virtual Summit: Shelley Addition.

According to the agreement, ADA holders will gain the option to store their assets in Coinbase Custody’s cold storage, but without losing the ability to delegate their stake, the emailed press release said. The feature will be available sometimes in the fourth quarter of 2020.

The press release also said that Coinbase Custody the first to offer staking while also keeping assets stored in cold wallets.

The custody agreement enables IOHK “to offer the same secure storage solutions that can be found in traditional finance to ADA holders, without sacrificing what makes Proof of Stake blockchains special - being able to participate in the network,” Hoskinson said.

He added that IOHK hopes that “Coinbase can be the custodian of preference for many institutional holders of ADA and other people who have large amounts” of it.

The companies found that these types of partnerships are “essential” on the path towards widespread adoption of crypto, given that they provide a solution for secure fund management, but one that also adheres to regulatory requirements. “The ability to successfully operate within a regulatory framework is essential for the long-term survival of cryptocurrencies,” said Sam McIngvale, Head of Product at Coinbase Custody.

“This will hopefully alleviate concerns from regulators about the security of cryptocurrency which have previously hampered it from being accepted into mainstream finance,” said the announcement.

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That is public information, and we already knew. The original Reddit poster claims that Charlies sold some or all of those ADA through Coinbase during/after the Hard fork and Cardano summit pump.
Quoting the article, you pasted above: “ADA holders will gain the option to store their assets in Coinbase Custody’s cold storage, but without losing the ability to delegate their stake.”
Can IOG, at the very least, provide the address/staking address of all the ADA moved to Coinbase? You guys provided the initial ADA address back in 2017, and said that “We will make a follow-up statement when funds are moved to a custom vesting address.” All other IOG addresses and pools are made public. Is there any reason why this info was not provided during the 2021 Cardano summit announcement?

Again I apologize if this sounds like I am attacking the project. I am blunt and like to ask difficult questions, especially regarding the public interest and my own investment. I am sure you would agree that it would be foolish of anyone to invest in something without research.

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For some reason you seem to feel entitled to have your suspicions confirmed or denied in some official capacity? Anyone with the information to actually do so would be legally obligated not to disclose it. Ambassadors, forum moderators, and the community audience you are addressing does not even have access to this information which makes this even more ironic.

In short, there is a significant difference between research and interrogation :smiley:

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Correct, I indeed feel entitled that the whole community deserves to know this particular information. I have given my reason why in my original post.
From the official IOHK website, Mr. Colin is actively working for the company and is a part of the team. He is not just an Ambassador, forum moderator, or community audience. My original post was also never directed to him or any particular team member. I asked for “official clarification” from IOG. They don’t have to reply here. They can write a blog post or simply send out a tweet.
Unfortunately, Mr. Colin decided to make a “joke” about my “bad question.” While many of our community members are still unclear on the actual concern. If Mr. Cloin has no authority to comment on such things, he could simply not reply to the post.
I would like to think that I have been quite rational and calm throughout my replies. I don’t believe that this was an interrogation, but rather a civil discussion, at least from my side. However, maybe you are right that I came off too strong. Like I mentioned above, I am a blunt person, and I asked a straightforward question. Therefore I will apologize for the third time; it’s not my intention to have any ill will or try to interrogate any team members.
@DinoDude , you are free to form your option on this matter, and I respect that. I assume that you don’t really care about the transparency of a company that is actively developing a tool for the people and a freer world. That’s fair.
However, please remember that many members like me are concerned about this situation, and we seek more clarification from the official source.

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Of course, random dudes on the Internet are entitled to nothing. And even if ten random dudes meet on Reddit, they are still not relevant.

On the other hand, yes, IOHK promised more transparency in the 2017 blog post: https://iohk.io/en/blog/posts/2017/10/17/statement-on-iohks-ada-holdings/ And if the owners of the company (whoever in addition to Hoskinson that might be) would want that transparency, they are, of course, not legally bound to keep it secret against their will.

While the Coinbase custody story sounds plausible, it also raises some question marks.

Why does the company that is building the tools to securely store ADA need another company to do it for them? It’s not like you need a lot of computational or real estate resources to store ADA.

And how do they choose, which of the zillion exchanges to prominently support in this way? Why not Kraken or Binance?

Why choose the company that promised to allow custody with staking at the end of 2020, but (according to these analyses) still hoards all of these funds unstaked more than a year later?

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Hello @Czeslaw

Since you (and others) are so concerned about this issue I assume you all spent some time researching Custody protocols and rules. For example this section from Coinbase custody:
Quote:
“2.6.3. Digital Assets Not Segregated. In order to more securely custody assets, Coinbase may use shared blockchain addresses, controlled by Coinbase, to hold Digital Assets held on behalf of customers and/or held on behalf of Coinbase. Although we maintain separate ledgers for User accounts and Coinbase accounts held by Coinbase for its own benefit, Coinbase shall have no obligation to segregate by blockchain address Digital Assets owned by you from Digital Assets owned by other customers or by Coinbase.”

TL:DR : Coinbase can at any time move, combine and separate customers crypto. While having no obligation to tell their customer where the crypto is located.

Also, I assume that you all read trough custody features like M of N signatory consensus and duress protocol setup and fully understand why customers may not be allowed to talk about those features, EVER! Otherwise they may void the custody agreement or maybe even become liable to be sued by other individuals that share that service.

All this research took less then 30 minutes on Google, so I’m sure all the concerned individuals know this. After doing this research it is clear that IOG may not even know the wallet address since custodies seem to operate like slow (on demand) crypto mixers. Also, there is a high likelihood that even if they know they are bound by NDA (or something similar) which could have serious consequences if they break the conditions of the contract.

The reason why I never found this concerning in the first place is because I don’t think of ADA as a stock in IOG since they are separate entities. That would be same thing as saying that if one CEO moves from company A to company B he is forever bound to reveal private info about company B to company A shareholders because he was in company A first?!? To me this make no sense.

However, I hope you find the answers that will give you some peace.
Good luck with your search :smiley:

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While that is usual also with “normal” exchanges, it is also somehow a contradiction to their promise that custody funds can be staked. I would have expected that they can be staked to a pool of the customer’s choice, which would require them to be at a separate and identifiable address.

On the one hand: This! There are a lot of requests here that have the attitude of “I feel like a paying customer and I want customer service!” and not of: “I am a participant in a network and I am responsible for my own education and my own errors.”

On the other hand: Back in 2017 in https://iohk.io/en/blog/posts/2017/10/17/statement-on-iohks-ada-holdings/, IOHK did promise: “We will make a follow-up statement when funds are moved to a custom vesting address.” That’s long ago and they, of course, could “modify” that promise to something like: “We moved X ADA to Coinbase custody and they therefore cannot be traced anymore. But we haven’t cashed out. Just believe us.”

While we are not paying customers with any entitlements to IOG/IOHK, the funds in question are of a magnitude that could jeopardise, e.g., the ADA price if sold all at once. So, I can somehow understand concerns about the whereabouts.

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Let me rephrase that question for you:
Why would any company that falls under multiple regulatory and tax jurisdictions seek out a solution whose primary point of differentiation is strong auditing and compliance services that would facilitate any such reporting?

That’s a lot better question - as I could actually talk about business cases that don’t involve any specific confidential information - like “why are custody services an important enabler for institutional adoption?”

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Thank you! That is a very valid point. I was, in fact, just thinking about the technical side of things. A little counter-intuitive that a company that knows less about the technology and manages the whole thing a lot less transparent could fulfil these requirements better, but law and business are often counter-intuitive. …

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They may be staked using pointer addresses or maybe there are preset rotation of the pools selected by the customer.

In general such amounts are traded OTC and never reach retail market price ticker. OTC never have any effect on the price you see on exchanges unless someone announces the trade ( like Michael Saylor likes to do after he fills up on Bitcoin :wink:).

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Can you imagine the number of conversations with auditors that actually go better leading off with “I wrote this software myself so there is no one to independently verify my numbers?”

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I just checked some of the Transactions happening from one of the IOG Private Pools around Epoch 253.
This is what I found (probably nothing new):

Here is what I did:

  1. Took one of the Private Pools
  2. Check which Stake Keys where assigned
  3. Identified the biggest Address related to it
  4. This address was used to move huge amounts of ADA (continuously received and Sent ADA, the biggest move was 100M)
  5. Primary recipient address was always the same: addr1qygm7m8hjqjgyd2qnrthl49g3jwzvnw8e8zfqqefrdx3d0s3hak00ypysg65pxxh0l223ryuyexu0jwyjqpjjx6dz6lq0pgy99
  6. From there the Funds were moved to multiple recipient addresses in bunches (most 2M)
  7. Those split addresses contain huge amounts of TX’s (found one with 60k TX’s) and lots of FT involved
  8. Seems logical that these are addresses related to an Exchange → None of the addresses I found is actually staking to any Pool

So for me, this means:

  • It’s plausible that the funds are moved to Coinbase
  • The fact that those wallets are not staked is also plausible as I think Coinbase still does not offer Staking to individual Pools

All in all, I would also see it in a way that IOG is not obliged to tell which amounts are moved to anywhere or managed by anyone. It’s in the nature of us trying to understand things but honestly, I don’t feel like I would be able to fully understand the legal and tax implications on the way how the IOG ADA are managed. Of course, I would also love if this now is the case for all the ADA which was staked to IOG pools or if it was just the case for my example above. Not sure if Coinbase discloses information about their ADA holdings.

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Pointer addresses would still be individual addresses, wouldn’t they? At least the three large wallets identified in the other thread are not staked at all. Maybe, they just did not fulfil their staking promise up to now. Doesn’t matter to me much. There are so many more relevant empty promises in crypto.