Investigation

Gets done before one entity, person or a company, buys a business, for instance.

Unforeseen liabilities risk

"We got off on the wrong foot.", that is what got stuck in my mind after listening to the recording of a recent online meeting between members of the Tron Foundation and the Steem Community Witnesses and I think it is true. The initiative for this early meeting came from the Tron Foundation and mister Justin Sun himself. Maybe because the community started to vote the original witnesses back in. No absolute majority anymore for the zombie witnesses controlled by the Tron Foundation, the new owners of SteemIt Incorporated. That would mean that no major changes to the blockchain could be enforced, like the one day Power Down. During the meeting it became clear why this was announced. There were three centralized exchanges involved in taking control over the Steem blockchain. And as far as I have seen they still have not removed their witness vote proxy. But there is this thing were the Steem Power that was used to do a take-over is owned by private entities, clients of these centralized exchanges.

That is one thing that is very wrong about this whole Steem Blockchain take-control attempt. Especially because the Tron Foundation / mister Sun lost the needed majority (17) of witnesses to enforce the ultra fast Power Down. Which was probably promised to the exchanges that conspired with mister Sun to get this coup done so fast. He took a gamble and got surprised again, this time by the Steem community. So, an early meeting was terribly needed, I presume. And the question now was "How can we make this a win-win situation together?" The Steem Community voting massively did turn events around, but we are not there yet, so keep voting, or select a proxy to vote for you. It was a very strong signal, probably very hard to ignore and for the (crypto) world to witness. And the exchanges involved want the Steem they used, from their clients, to return as soon as yesterday. The pressure on mister J. Sun must be enormous, as it seems this is moving towards a check-mate situation. But this is not a game of chess... It is about a lot of money, that also became very clear during the meeting. So, how to turn such an impasse into a 'win-win' situation?

13 Weeks Power Down... Too long?

Well, the centralized exchanges involved probably were promised a 'hit-and-run' kind of event. After it got done a change to blockchain software would be put in place, so they could Power Down within 24 hours. If the Steem they used from their clients were to be locked in for 13 weeks, that would cost them a lot of money. Losing trust would cost them clients, as they now already are losing a lot. And the Crypto-Currency realm would probably call them out on this conspiracy. Laughing it off does not help now. So, the Exchanges involved, the Tron Foundation and mister Sun seem to be locked in a mess that they have created themselves. Now the Steem Community stepped up, the tables seem to have turned and the longer it takes, the more things move to a check-mate for the conspires. They call for a 'win-win' solution. Move forward to a brighter future where Steem and Tron team up. That does sound like a 'win-win'. And why not?

The Steem Community Witnesses asked to remove the accusations of them being a malicious bunch of 'hackers', publicly. It is a bit unclear to me if that got a positive reply. Even the request to at least set the price-feed right, did not really seem to have made it. Although mister Sun stated he would have the tech-guys look into it. It seems he says one thing and does the other. No reply to the question to retract the illegal votes and thus have the zombie witnesses step down. He stated though that actually all he really wants is a profit and it seems by that he means at a very short term. Like within 24 hours, then put the Steem on exchanges and sell. And he is convinced that he can do so with all the accounts that have its private keys controlled by SteemIt Incorporated. Which he now owns, therefore, he claims that he can Power Down all the Steem in those accounts and cash in to make a profit on his investment. And maybe that sounds reasonable to you. Like buy something and it is yours to do what you want with it? Nah, not exactly, there are laws, for instance, contracts, obligations and liabilities. And so mister Ned Scott, the former CEO of Steemit Incorporated, was made the scapegoat again. But wrongly so... Even though one might question the way he handled this, he is not the one to blame, as far as I can see.

There is this thing you see...

It is called a due diligence investigation, and any potential buyer should have one performed for the entity that is to bought. It is not only about things like the financial situation. But it is also about finding unforeseen risks. Or to find obligations that were not mentioned before, to be prepared, just in case. And then there is the unforeseen liabilities risk. Investigating all of this and looking for the so called 'hidden skeletons in the closet' should be done when a business take-over is to be considered. The seller of the Entity could point out to a potential buyer that it is that ones own responsibility to do a thorough due diligence investigation before signing a contract. But any solicitor/lawyer or notary would strongly advise a potential buyer of a business entity to do so. Meaning? Even if mister Ned Scott could have been more transparent to the SteemIt Inc. employees and the Steem Community, he is not the one to blame for the actions of mister Justin Sun and the Tron Foundation, supported by the three centralized exchanges, using their clients' Steem. Mister Sun and the Tron Foundation should have done a proper due diligence investigation.

It seems they have not done so though, not well enough anyway. Why? Otherwise mister Justin Sun would known about the obligations and deferred liabilities towards the Steem Community. All locked into the blockchain, to be seen as a promise, a contract, an obligation. Like the way the accounts of which the SteemIt Incorporated has the private keys will be used. The SteemIt controlled account made statements and promises that way, that can be seen as a mutual understanding or agreement between two parties. And all the proof is here on the Steem blockchain, for everybody to see and confirm. If this evidence will hold up in a court of law, I do not know. If the new owners of SteemIt Incorporated can be held to honor these agreements, I do not know either. But it seems highly unlikely to me that this was unknown to the potential buyer at the time. And maybe even mister Ned Scott told them about these mutual agreements.

Mister Sun wants his money (Steem) out.

And he does not seem to be willing to come to any agreement with the Steem Community and its Witnesses that will keep the Steem Power in accounts like SteemIt. Which was supposed to be used for development and so on. When he finds a way to pull all the Steem Power out, denying all the obligations connected to those accounts, then what does that mean for the Steem blockchain? Basically that would mean there is no reason for SteemIt Incorporated to stay in business. All the connected accounts will be drained dry, probably after 24 hours. Millions of Steem will be sold, where mister Sun probably will go for a nice profit, short term. At least that is what I got from his remarks during the online meeting. But I do not think he expected the Steem Community to stand up and take matters into their own hands. He would need a drastic change of the Steem software to be approved by at least 17 witnesses to get it done. And the Steem Community prevented that from happening. So now he is in big trouble, because the centralized exchanges that conspired with him in this probably thought this'd be a matter of days.

Using their clients funds could be excused as it was needed to be done. And handing out some free Cryptos next, that would ease the pain for sure. But... How much would it cost those exchanges if it took them 13 weeks to get it all back? Not to mention all the clients leaving them, nobody wanting to do business with them anymore. Did they believe mister Sun his plan was waterproof? We probably will never know. And all the Steem Community now needs is to find those agreements with SteemIt Incorporated about the usage of certain accounts, of which SteemIt Incorporated controlled the private keys. Is it worth going to court with this? Well, I know that 'even' a verbal agreement has legal status, if there are enough witnesses to confirm. It must be relatively easy to find those kind of promises, obligations and agreements on the Steem blockchain, as done by SteemIt Incorporated. And then the only question remains if the new owners are bound to these deferred liabilities, or not. And do we as the Steem Community want to be bothered with a long term court case?

The heat is on mister Sun his side now, he can feel it burn. And the exchanges that conspired with him in this, they want out, before too much damage is done and they even have to close shop. It seems to me the Steem Community is holding a real strong hand, no need to bluf. Take it easy for now, let the heat turn up some more and keep voting for the Steem community witnesses, or choose a vote proxy. Check-mate soon? Well, I think before next week this situations will have taken a complete different turn.

Steem on!

Check-mate?

Image cc-by-sa @oaldamster.