Original author: Tim Craig, DL News
Original translation: Felix, PANews
Developed and maintained by Simple Rules, the once thriving Harmony public chain is facing accusations. Former employees of Harmony accuse the remaining two co-founders of Harmony of misconduct and mismanagement.
Five former team members and several Harmony ecosystem developers accuse CEO and co-founder Stephen Tse of "controlling" employees in violation of his promises, resulting in a sharp decline in Harmony's users and developers in the past year.
The same group of employees accuses one of the co-founders, Li Jiang, of "poor financial management," which has led to Harmony's treasury value dropping from $1 billion at the beginning of 2022 to $50 million today.
Several former team members also claim that a disgruntled ecosystem builder physically assaulted Stephen Tse at Harmony's office in Palo Alto. The attacker claimed that Stephen Tse had violated a $250,000 funding commitment.
Chaos at Harmony
Harmony is a public chain that supports smart contracts, allowing ecosystem developers to build DeFi protocols, crypto games, and NFT projects. Harmony's biggest attraction is its lower transaction fees compared to the Ethereum network. Harmony was also one of the several Layer 1 chains that experienced a surge in market value during the 2021 crypto bull market.
Last year, Harmony's TVL reached a high of $1.42 billion. Harmony's flagship application is a fantasy RPG game called "DeFi Kingdoms," which was popular among crypto "degens," and the native token ONE also approached its all-time high price. However, 1 year later, Harmony became a "ghost town" (indicating lack of interest).
As of June, its TVL is less than $3 million, a decrease of 98%. Developer activity has slowed down significantly. The price chart of the ONE token looks more like a pump and dump rather than the "future of finance."
Although many attributed Harmony's downfall to the Horizon Bridge hack in June last year, resulting in a loss of $100 million, former team members, ecosystem developers, and community members also pointed out that Harmony's leadership was another fundamental reason.
Forcing Employees to Play Basketball Daily
A former employee described Tse's typical behavior: he would shut down employees' computers to get their attention, and regardless of how busy and efficient the employee was, they were forced to play basketball with Tse for over an hour every day.
Another source even suspected that if they didn't play basketball with Tse as requested and with "Stephen" (referring to Tse jokingly as Stephen, a famous NBA player), they might lose their jobs.
Another former employee shared multiple stories of how Tse treated team members. He described how Tse would grab employees' arms and "move them around like chess pieces" during company events (sometimes during conversations), gossip about them behind their backs, and undermine them in front of colleagues.
"It's well-known that Tse would interrupt employees and say, 'Please take a few minutes of my time. Do you have any questions for me? If you don't ask Stephen questions, he would feel disappointed and say he'll be back in a few minutes, hoping you have questions when he returns."
Another former team member said, "He often forces you to say something or forces you to ask something, whether you want to or not."
"I want to cry, let me cry"
The informant also said that Tse often stood in front of the employees and said, "I want to cry, let me cry." Tse would ask the employees to tell a story, trying to make them cry.
The former team member also claimed that Tse did not provide full-time employee status to the team members, but instead hired them as contract workers. A source said, "They hired full-time employees and paid them as contract workers." He explained that due to the employees' contract worker status, they did not receive enough vacation time or benefits.
Founder of the ecological project subjected to personal attacks
However, the most shocking event occurred on July 5, 2022, when Tse was physically attacked at Harmony's Palo Alto office. Three former Harmony team members who witnessed the attack claim that it was carried out by Hochung Nam, the co-founder of the Harmony-funded project.
The project was initially called 1 wallet when it was funded by Harmony, but later renamed Timeless Wallet. It is a Harmony community project developed by Tse's friend Zi Wang, and promised to provide $1 million in grant funding to establish a so-called "social wallet to support the next 100 million users on Web3."
According to two informed sources, the first allocation of funding for the project is promised to be $250,000. A source revealed that Zi Wang and his partner Nam developed this project with their own funds, and they believed that the grant from Harmony would cover these expenses. However, Tse violated the funding commitment. This prompted Nam to go to the Harmony office to inquire about the reason.
A former team member who witnessed the attack said, "Hochung went to Harmony's office in Palo Alto and discussed the matter with Tse. They had an argument, calling Tse a fraud, and Hochung physically assaulted Tse in the office. Everyone in the office saw it."
Another former team member stated, "After the incident, I immediately dialed 911 on my phone in case the attack continued."
After the attack, this former team member immediately had a conversation with the current team members at Harmony, and one message wrote, "Tse's nose may be broken."
A source said, "In the end, I believe that Nam and Zi Wang received less than $100,000."
Three former team members stated that after the attack, due to "serious concerns" about the security of the core team, company meetings and activities were held at multiple locations in the San Francisco Bay Area instead of the Palo Alto office.
Tse and Nam did not respond to requests for comments on this matter.
Conflict with Zi Wang and Nam is not the first time Tse has had business disagreements with friends. In 2020, Harmony co-founder Alok Kothari filed a lawsuit against Tse and three other Harmony co-founders in the Superior Court of Santa Clara County (lawsuit). The lawsuit alleges that Tse defrauded Kothari of his ownership in Harmony. Court documents show that Tse denies these allegations. The case is still ongoing.
Little Remaining Funds
What caused the dispute between Tse and Timeless Wallet?
According to multiple sources, by mid-2022, poor financial management has left Harmony with little remaining funds, unable to fulfill any previous commitments of grants.
The treasury is a pool of encrypted assets reserved for blockchain projects. Treasury funds are typically used for business expenses, employee salaries, and project development support.
A former team member states, "With the cooling down of the previous bull market, Harmony's funds have significantly decreased from nearly $1 billion. Jiang did not properly allocate treasury funds, with the majority being the ONE token."
"Jiang never kept track of the funds promised to recipients, nor held the promised funds in stablecoin form. When the market collapsed, the funds promised by Harmony to recipients evaporated as well."
On-chain data shows that Harmony's treasury is currently entirely composed of ONE tokens. In early 2022, ONE reached a high price of $0.35, but its current price is approximately $0.01.
Harmony official Twitter account revealed the wallet address indicating that the Harmony Treasury is worth about $50 million. However, due to the lack of liquidity in the ONE trading market, the actual value of the Treasury may be much lower.
"Sounds like former employee rumors"
In response, Jiang said, "We strongly oppose these claims as they sound like false statements from disgruntled former employees who now work for competitors."
Jiang stated that Harmony's issues are a combination of multiple crises, such as the June Horizon bridge hack, Terra, the liquidity crisis triggered by hedge fund Three Arrows Capital and FTX collapse.
Jiang further stated, "I chose to stay at Harmony to help the ecosystem and the team recover. We have recently hired 10 full-time team members, including members from the Ethereum ecosystem and UC Berkeley, among other top schools. We have laid out a roadmap for the scalability and user adoption of the protocol this year, and we are working hard."
DAO, more DAOs, like 10,000
In addition to poor fund management, Tse and Jiang's obsession with decentralized autonomous organizations (DAOs) further depleted Harmony's funds. In 2021 and 2022, they pledged $50 million in grants to fund "10,000" DAOs to build Harmony.
Tse said in his keynote speech at ETHDenver 2022: " 10,000 DAOs, that's our commitment. We're not only going to allocate all our funds and governance to 10,000 DAOs, but we also believe that DAOs are the right form to achieve this goal, sustaining our future."
DAOs are a popular emerging business management structure in the cryptocurrency field.
Although DAOs have achieved some success, DeFi protocols in the Ethereum ecosystem, such as the liquidity staking platform Lido and the decentralized exchange Curve, have flourished under a decentralized structure. However, due to the lack of clear regulation, DAOs have also attracted scammers.
Read books by Harari, my friend
Documents released on Harmony's Notion website show that senior team members often oppose DAO plans. In an off-site Q&A, Jiang did not alleviate concerns from the outside, but delivered a philosophical speech. "We should all read the three books by Yuval Noah Harari, to see how Web3 and DAOs will become the dominant narrative of the 21st century."
When Harmony actually started funding DAOs through its grants program, it was done without any planned approach.
The threshold for distributing funds is very low. Multiple DAOs have received six-figure funding after just writing proposals. Some DAOs have received a five-figure reward for reaching low-level goals such as 1,000 Twitter followers or 100 Discord members.
Posts on the grant forum show that Tse and Jiang have spent a considerable amount of Harmony's funds to support dozens of DAOs, some of which have taken the money but provided little to no return.
A former Harmony employee who has worked on the funding team said, "There was a requirement at one point that the team had to join 100 DAOs per month, because Tse wanted as many DAOs as possible, even though it seemed to me that Tse didn't truly understand what DAOs were, and feedback from the team indicated that it was a terrible idea." Another former team member stated that there were no criteria established for evaluating and approving DAO proposals until the program was nearing its end. Projects that received funding were often those favored by Tse and Jiang.
"A Moment of Illusion"
One of the most controversial DAOs funded by Harmony is the Blu 3 DAO, which focuses on empowering women and non-binary individuals in the cryptocurrency field. Blu 3 DAO released its proposal on the funding forum on February 18, 2022 here, and within 24 hours, Jiang approved a funding of $1 million. A source said that the decision to fund Blu 3 DAO was made during a dinner at the ETHDenver conference.
In response, members of the Harmony team expressed surprise to see someone casually committing to donate $1 million, especially to someone they had just met recently, considering it to be a "miraculous moment".
Like most DAOs funded by Harmony, Blu 3 DAO has stopped posting updates on the grant forum. Jess Furman, a core team member of Blu 3 DAO, expressed gratitude for the $75,000 received from Harmony before the funding program was paused, but stated that Blu 3 DAO is "no longer an official partner of Harmony".
DeFi project departs
Reckless funding of DAO has caused harm to Harmony. Ecosystem developers are starting to leave Harmony. Projects that were promised funding by Tse and Jiang, such as DeFi Kingdoms, have been neglected. Eventually, DeFi Kingdoms abandoned building on Harmony. According to Artemis' data, there are only 12 active developers left per week.
Bolon Soron, the alias director of DeFi Kingdoms, said, "We have decided to stop development on Harmony and move to another chain. There are multiple reasons for this. Over time, communication and technical collaboration with the Harmony team have become increasingly difficult. Their team hasn't delivered on the agreed grants from months ago and hasn't shown any sincerity in trying new arrangements."
Another unnamed Harmony ecosystem builder stated, "As a participant trying to build truly valuable projects on Harmony, this is very disappointing and frustrating. For weeks, we have received no response from the Harmony team, while these random DAOs seem to get all the attention."
"How could they be so terrible?"
By the end of 2022, Harmony is in a precarious situation. However, a recent development may bring a glimmer of hope.
On January 23, the Federal Bureau of Investigation (FBI) announced that they have traced the stolen assets of over $60 million in the June Horizon Bridge hack to the North Korean cybercrime group Lazarus Group. A week prior, Binance CEO Changpeng Zhao stated that Binance had frozen approximately $2.6 million worth of Bitcoin related to the hack attack.
Among the 8 co-founders who started Harmony in 2018, only Tse and Jiang remain. And all former employees of Harmony who were interviewed requested anonymity because they expressed concerns that Tse and Jiang would take legal action. "Tse loves to sue," said one source.
Many still cannot understand how such a hopeful project ended up in this situation. An ecosystem developer said, "I wonder how they could be so terrible, the level of neglect they showed in the 6 to 12 months is shocking."
