- Hector Network has shut down its official Discord server.
- The move has cut off investorsfrom the central team amidst a $16 million liquidation process.
Hector Network’s official Discord server has gone dark and some investors say they fear the team may be engineering a so-called hard rug — where a project’s funds are abruptly removed, abandoning investors with worthless tokens.
The official Discord served as the only communication channels between investors and the team behind the failed Fantom-based DeFi ecosystem.
“There is no backchannel open anymore,” Lilbagscientist, a pseudonymous investor and vocal critic of the team, told DL News. “The DAO has been sidelined completely.”
In Hector Network’s case, the money at stake is the $16 million left in the project’s treasury. This sum is a far cry from the $100 million the project controlled during its peak in 2021.
Dejected investors have accused the Hector Network team of embezzling these funds via a so-called slow rug pull — where instead of removing all the funds at once, team members award themselves fat salaries without delivering on the project’s roadmap, slowly draining the pot.
‘There is no backchannel open anymore.’
— Lilbagscientist
Aggrieved Hector Network investors say the team syphoned much of the project’s funds over a lacklustre 18-month period stretching back to 2021.
DAO votes show the team collected $51 million in salaries during this period but investors say they delivered little by way of useful project updates capable of driving value for token holders.
“I just find it hard to believe with $110 million you can’t get something started, not one thing that actually moved forwards,” one pseudonymous DAO member named Jintu said on the community Discord server.
“It’s sheer incompetence and greed,” said another DAO member, who spoke to DL News on the condition of anonymity
NOW READ: Investors rip Hector Network team after it squanders $100m treasury and ‘rage quits’ DeFi project
The community Discord server was set up by concerned investors after they were censored from the official one by the Hector Network team in April.
It runs parallel to the official Discord, retaining information from the latter.
The platform has become the only public forum for community engagement among DAO members with the official one going offline.
Hector Network did not respond to requests for comment but has rejected the accusations in a June 14 statement.
Lack of transparency
The shutting down of the official Discord server comes barely a week after a controversial rage-quit vote by the project’s DAO.
Rage quitting in crypto is when investors force a DAO vote to dissolve a project’s treasury to recoup their investments.
The controversial vote interestingly came after the team had railed against efforts by a group of aggrieved investors to reach a similar outcome.
The vote also followed a reported $8 million lost funds in the Multichain bridge incident.
Hector Network’s treasury liquidation is supposed to take between six months to a year following the DAO vote, according to a previous statement by the team.
The treasury is supposed to be shared pro-rata amongst token holders.
The team created a committee to oversee the liquidation process.
This group consists of law firm Sparring Legal, and blockchain security auditors Certik and Hacken as smart contract auditors, according to a Telegram announcement by Hector Network.
Other members include a finance head, a head of development, and a liquidator to be assigned by Sparring.
DAO members have no representative in the group, which has heightened anxiety within the community, exacerbated by the official Discord shutdown.
NOW READ: DAO raiders accuse Hector Network of ‘slow-rugging’ investors as treasury dwindles
DAO members fear the lack of transparency could serve as a cover for the team to lay claim to an even larger share of the diminishing pie.
“As the team still owns and holds the treasury, there is nothing preventing them from coming up with some bogus accounting or even drain the treasury to pay for legal fees towards Sparring,” Lilbagscientist said.
Martin Repka, an associate at Sparring, told DL News that attorney-client privilege precluded the law firm from independently commenting on the situation.
“We represent Hector Network, but we do not represent individual token holders, or individual liquidation committee members,” Repka said.
The law firm is committed to “working diligently to ensure legal compliance and integrity of the liquidation process” in its role as legal counsel for the process, Repka said..
Sparring and the liquidation committee will provide answers where appropriate, Repka said.
‘Incompetence and greed’
The Hector Network is one of several Olympus DAO forks — a popular crypto reserve currency project that had its heyday in the DeFi Summer of 2021.
Its founders fashioned their online personas from Greek Mythology — using names like Zeus, Poseidon, Prometheus, Agenor, among others.
Like other Olympus DAO forks, Hector Network’s strategy relied on the offer of massive annualised yields of up to 100,000% at the start of its run.
‘It’s sheer incompetence and greed.’
— Anonymous Hector Network DAO member
The success of Olympus DAO had yield chasers on the hunt for avenues to earn massive gains.
This created a boon for projects like Hector that offered inflationary yield mechanisms that do well when the market is booming but turn sour quickly when bear markets emerge.
Hector Network’s initial wild run saw its native token HEC rally to a peak of $357 in late 2021.
It is now trading at $0.03, a whopping 99.99% downturn.
NOW READ: Aragon’s $200m activist battle ignites DAO debate: ‘Lining up soldiers doesn’t mean an attack’
The problem for Hector Network was that its inflationary yield meant that a constant influx of investor funds was necessary to maintain the high yields and keep the HEC token valuable.
However, the crypto winter beginning in November 2021 saw crypto investments dry up, leaving yield merchants like Hector Network in limbo.
Angry investors said this period is when the team should have used the treasury to create value for token holders but failed to do so.
The Hector Network saga may well end up in the law courts. But for now, investors who spoke to DL News say they just want to recoup some of their investments, no matter how little.
To share tips or information about DAO governance please contact me at osato@dlnews.com.
