Harmony internal leak: Founder lost $950 million in two years, co-founder forces employees to play basketball.

Original Title: "Harmony execs mismanaged funds and bullied workers, ex-staff claim"

Original Author: Tim Craig, DL News

Original Translation: Qianwen, ChainCatcher

Former employees of Simple Rules (which developed and maintained the once-thriving Harmony blockchain) have accused the company's current co-founders of misconduct and poor management.

Five former team members and several Harmony ecosystem developers have accused CEO and founder Stephen Tse of "exerting control" over employees, leading to a sharp decline in Harmony's users and developers over the past 12 months, according to DL News.

These employees accused another co-founder and deputy leader, Li Jiang, of "poor management", which led to Harmony's funds decreasing from around $1 billion at the beginning of 2022 to around $50 million currently.  

Chaotic Start

Harmony is one of the several "Layer 1" blockchains that saw a surge in value during the 2021 cryptocurrency bull market. It is a smart contract chain that allows ecosystem developers to build DeFi protocols, crypto games, and NFT projects. Harmony's biggest draw is its significantly lower transaction fees compared to the dominant Ethereum blockchain.  

Last year, Harmony's total locked value reached a high point of $1.42 billion, which is used to measure the assets deposited in DeFi protocols on the blockchain. Harmony's flagship application is a fantasy RPG game called "DeFi Kingdoms", which has become popular among cryptocurrency enthusiasts, and the trading price of its native token ONE is also strong, approaching its high point. Things seem to be going well.

However, after 12 months, this blockchain became a deserted "ghost town" with no one interested in it.

The remaining assets are less than $6.9 million, a decrease of 95%. The research and development team has almost no action. The price trend chart of ONE token looks like what cryptocurrency traders call "pump and dump" (the project party pushes up the price and then sells it), rather than "the future of finance". 

Although many people attribute the collapse of Harmony to the $100 million hack suffered by Horizon bridge in June last year, former team members, ecosystem developers, and community members also point out that Harmony's management is also to blame.

Harmony's ecosystem developers have detailed their willingness to communicate with blockchain leadership, but have not received a response for weeks. This process has become increasingly difficult and has led to Tse and Jiang's lack of sincerity in making new arrangements, breaking investment commitments.  

「每天被迫打篮球」

translates to

"Forced to play basketball every day"

in English.

A former employee described Tse's classic behavior: he would shut down an employee's laptop in the middle of work to get their attention, and this employee was forced to "play basketball for over an hour every day... no matter how busy they were." 

Another informant even suspects that if they don't play basketball with Stephen as required, they may lose their job. 

Another former employee described how Tse treated team members: he would grab their arms - sometimes during conversations, sometimes during company events - and "move them around like chess pieces", talking about them behind their backs and belittling them in front of colleagues. 

"As we all know, he interrupts his employees and says, 'You can take a few minutes of my time now. Do you have any questions for me?' If you don't have any questions for Stephen, he will be disappointed and say he will be back in a few minutes. When he returns, he hopes you will have your questions ready."

This employee was forced to "play basketball for over an hour every day... no matter how busy he was at work". 

Another former team member said: "He often comes over and forces you to say something or forces you to ask something, whether you want to or not." 

"I want to cry, say something that can move me"  

 The informant also said that Tse "often stands in front of us and says, 'I want to cry. Say something that can move me.' He will ask us to tell a story that can move him, which is very strange."

Former team members also claimed that Tse did not provide full-time employee status to team members, but instead had them work as contract workers. One source said, "They hire full-time employees and pay them as contract workers." He explained that because of the employees' contract worker status, they did not receive enough vacation time or benefits. 

Many employees who have signed contracts with Harmony have expressed that their working hours far exceed the time stipulated in the contract, as they have not taken any leave or other benefits. 

「Stephen's nose may have been broken」 

When Harmony provided funding for the project, it was called 1wallet, but later it was renamed Timeless Wallet. This is a Harmony community project developed by Tse's friend Zi Wang, and has received a commitment of $1 million in funding to build a so-called "social wallet for 100 million users on Web3".

According to two informed sources, this project has been promised a first grant of $250,000. One source revealed that Wang and his partner Nam developed this project with their own funds, and they believe that the Harmony Foundation will pay for these expenses.

Two sources have said that Tse ignored the information about "Timeless Wallet" and violated investment commitments. As a result, Nam came to Harmony to seek answers.

Another former team member said, "When the attack happened, I was ready to call the police to try to stop it."

The same source of the message also shared screenshots of conversations with Harmony team members immediately after the attack to confirm the authenticity of their comments. One message read, "Stephen's nose may be broken."

"I think the final amount of money they received was less than $100,000," said a source.

Three former team members stated that, following the attack, company meetings and events were held at multiple locations in the San Francisco Bay Area instead of the Palo Alto office due to "serious concerns" for the safety of the core team.

Tse and Nam did not respond to DLnews' request for comment.

The conflict between Tse and Wang and Nam is not his first disagreement with old friends in business. In 2020, Alok Kothari, co-founder of Harmony, filed a lawsuit against Tse and three other co-founders of Harmony in the Santa Clara County Superior Court. The lawsuit alleged that Tse had cheated Kothari out of his ownership in Harmony. Court documents show that Tse denied these allegations. The case is still ongoing.

Deeply Trapped in Financial Difficulties

Multiple sources have indicated that by mid-2022, poor financial management has left Harmony with almost no cash to fulfill any previously promised disbursements.

A former team member said: "With the cooling of the previous bull market, Harmony's funds have dropped significantly from nearly $1 billion. Li did not diversify the reserve funds well and concentrated most of the funds in one company."

"He has never tracked the funds we promised to the recipients, nor held their promised funds in the form of stablecoins. When the market collapsed, the assistance they promised also collapsed."

The on-chain data shows that the Harmony treasury is currently held entirely in ONE tokens. After reaching a trading price of $0.35 in early 2022, the current trading price of ONE is approximately 2 cents. 

"Misrepresentations made by a small number of employees."

"We strongly oppose this statement," Jiang said in response. "It sounds like a false statement from a former employee who is now working for our competitors with resentment."

He said that Harmony is facing a cryptocurrency liquidity crisis caused by the June Horizon bridge hack, the Terra blockchain, hedge fund Three Arrows Capital, and the recent collapse of FTX.

"I choose to stay in Harmony and help our ecosystem and team regain momentum," he said. "We have recently hired 10 full-time team members, including experts from the Ethereum ecosystem and top schools such as the University of California, Berkeley. We have developed a roadmap for protocol scalability and user adoption for this year, and we are working hard."

Obsessed with DAO

Aside from poor financial management skills, Tse and Jiang's obsession with DAO further depleted Harmony's funds. In 2021 and 2022, the two promised to fund "10,000 DAOs" through a grant program.

"10,000 DAOs, that's our commitment," Tse said in his keynote speech at ETHDenver 2022. "We will not only invest all of our funds and governance into these 10,000 DAOs, but we are also convinced that DAOs are the right structure to sustain our future."

DAO has achieved some success recently. Popular Ethereum DeFi protocols, such as the liquidity staking platform Lido and the decentralized exchange Curve, are thriving in a decentralized structure. However, due to the unclear regulatory system for DAOs, this concept has become a tool for scammers to make money.

"We should all read Yuval Noah Harari!"

The files released on the Harmony Notion website show that senior team members often oppose the DAO plan. In an off-site Q&A, Jiang did not address people's concerns, but became philosophical. Written records show that he once said, "We should all read Yuval Noah Harari's three books and see how Web3 and DAO will become the dominant narrative of humanity in the 21st century."

"The entire team is urging them not to shift their focus," said an ecosystem developer.

When Harmony finally began funding DAOs through its funding program, it did not follow the plan. 

The threshold for cash distribution is very low. Multiple DAOs have received six-figure bonuses simply by submitting proposals. DAOs typically receive five-figure rewards for achieving low targets such as 1000 Twitter followers or 100 Discord members. 

According to posts on the funding forum, Tse and Jiang spent Harmony's funds to support several dozen DAOs, some of which took the money without providing much, if any, return.

"For a period of time, we required the team to join 100 DAOs every month," said a former Harmony employee who worked in the funding team.

"The reason is that Stephen wants as many DAOs as possible, although in my opinion he doesn't really understand what a DAO is, and the team also thinks it's a terrible idea."

The same source also confirmed that there were no standards for evaluating and approving DAO proposals until the project was nearing completion. Another former team member stated that "funded projects are often those that Stephen and Li Jiang personally like."

「超现实的时刻」 

translates to

"Superreal Moment" 

 One of the most controversial DAOs funded by the Harmony Grant Program is Blu3 DAO - an organization focused on empowering women and non-binary individuals in the cryptocurrency industry. On February 18, 2022, Blu3 DAO released a proposal on the funding forum and received a grant of $1 million from Jiang in less than 24 hours. According to a source, the decision to fund Blu3 DAO was made during a dinner at the ETHDenver conference. 

The Harmony team was surprised by this and called it a "surreal moment, where someone casually promised to donate $1 million, especially to someone they just met recently."

Like most DAOs that received funding from Harmony, Blu3 DAO has stopped posting updates on the grant forum. In a statement sent to DL News, Jess Furman, a core member of the Blu3 DAO team, expressed gratitude for the $75,000 received from Harmony before the funding program was paused, but stated that Blu3 DAO is "no longer an official partner of the blockchain". 

DeFi Kingdoms Exodus

DAO's reckless allocation of funds to Harmony has caused losses. Ecosystem developers are starting to leave this blockchain. Legitimate projects promised funding by Tse and Jiang, such as DeFi Kingdoms, have also lost attention. In the end, they gave up building on Harmony. According to data from the crypto measurement platform Artemis, there are only 12 active developers left per week. 

"We have decided to stop development on Harmony and switch to another blockchain for several reasons," said Bolon Soron, the anonymous director of DeFi Kingdoms. 

"For the past few weeks, we have not received any response from the Harmony team in our communication, while these random DAOs seem to have received all the attention."

"For some time now, communication and technical cooperation within the Harmony team have become increasingly difficult. Their team has also decided not to honor agreements reached several months ago and has no willingness to make new arrangements."

Another Harmony ecosystem developer who declined to be named said: "As a participant trying to build a legitimate project with real value on the basis of Harmony, this is very disappointing and frustrating."

By the end of 2022, the outlook for Harmony seems bleak. However, a recent development may bring a glimmer of hope.

On January 23rd, the Federal Bureau of Investigation (FBI) confirmed that over $60 million in assets stolen during the June 2020 Horizon bridge hack have been traced to the Lazarus Group, a criminal organization in North Korea. One week prior, Changpeng Zhao, CEO of Binance, confirmed that his exchange had frozen approximately $2.6 million worth of Bitcoin related to the hack.

Among the eight co-founders who launched the Harmony project in 2018, only Tse and Jiang remain. All former Harmony employees interviewed by DLnews requested anonymity because they were concerned about Tse and Jiang. "Tse loves to sue," said one source.

As for the remaining employees in the Harmony community, they are still trying to understand how such a promising project could end up in such a situation.

A developer in the ecosystem said, "I want to know why the results are so bad." "In the past 6 to 12 months, their negligence has been shocking."

Of course, the story has opened a new chapter, and the name of 1wallet has been changed to Timeless Wallet.

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