Phantom vs Rekt, what went wrong

A recently aborted investigation by Rekt News about the Fantom Foundation has sparked several moves that may indicate a lack of transparency on the DeFi platform. The article had called it “an elaborate scheme,” but apparently the subject had not been approached closely enough.

1-2 hours after the piece was published, Rekt removed it and tweeted an apology. An archive of the original research can be found here

This response from Rekt was not perceived as clear enough by their readers. Why have they not publicly clarified their mistake? Several users have pointed out that it is fundamental for crypto journalism to carefully monitor allegations as they can have an impact on the market.

However, the readers who debunked the research also added important data, indicating that there may still be gaps in information about Fantom that need to be investigated.

A quick summary

Following the news that Andre Cronje and Anton Nell were exiting the DeFi and crypto space, Rekt took a closer look at farm YFI’s first wallet (wallet 0x431), which they had previously started investigating.

“We found that 0x431 had an unparalleled level of power across the entire network, all held by one EOA wallet.”

Apparently the 0x431 wallet had made huge transfers in FTM ($750 million in FTM) in the past 5 months “using a different address as a buffer before sending it to Binance.” These and many other details found by Rekt suggested a “centralized scheme to make money” and “gross mismanagement of their foundation funds”.

Rekt interviewed Fantom, but the answers — or lack thereof — didn’t clarify their many assumptions and raised more concerns, leading the investigation to assume that “basic operational security measures are simply not being followed.”

“Either the foundation is lying, or this is a gross matter of mismanagement by the Fantom Foundation.”

the inaccuracies

A Twitter user shed some light and debunked one by one most of the claims published in the article by adding supervised valuable data. They also stated that the types of investigations conducted by Rekt are critical to the crypto and DeFi environment, but this time they “missed the shady practices”.

The user explained that “The wallet in question” [0x431] sent FTM ERC20 tokens to Binance ETH and then withdrew it to the same wallet address on Fantom. Why? To fuel the bridge with native Fantom tokens.”

This was verified by Multichain CEO Zhaojun:

“I can confirm that fantom guys are using a 0x431e81 account to restore the fantom liquidity of the Multichain bridge.

1. Deposit FTM-erc20 to Binance,

2. Withdraw and deposit Native FTM on Bridge. ftmscan.com/tx/0xa16cc05cc

3. Repeat steps.”

The other wallet in question, 0x579, also appears to be a bridge, although the Fantom Foundation had claimed otherwise.

The user added that “it seems like not ALL FTM that entered Binance on Ethereum have reappeared on Fantom. Yes, the majority have, but further research on exact numbers would be helpful.”

Rekt had noted that the wallets in question made huge moves during a period of heightened FTM FOMO, but the quoted user thinks this makes sense because “During this time, a LOT of people wanted to enter Fantom Network through the bridge. So the team put in more effort to fuel it with native FTM.”

However, some of Rekt’s questions remain open, such as why aren’t the foundation’s funds stored on a multisig?

The Foundation had also claimed that the funds from wallet 0x57900 were intended in part for the stimulus program announced in August, along with other FTMs the foundation owns. The quoted user also finds it important to know “how & to whom (and why) incentives are given out.”

Coin-Crypto contacted the Rekt team with several questions about the research process behind the article, but they did not return for comment.

Some have claimed that they are liable for losses.

The Fantom Foundation has a statement claimed that Rekt had made “many false claims about the Foundation” and seemingly tried to allay investors’ concerns about Andre Cronje’s departure. It doesn’t look like they will take legal action against Rekt.

Fantom price

Fantom (FTM) has reacted with a downward move on the news that Andre Cronje and Anton Nell are exiting the DeFi and crypto space. FTM also seems to be following the general trend of the crypto market and is down 5.12% in the last 24 hours.

FTM is trading at $1.20 in the daily chart | Source: FTMUSD on TradingView.com

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