Former Harmony employee's account: Poor management by executives interferes with employee work

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

Author: Tim Criag

Translation by: Qianwen, ChainCatcher

Former employees of Simple Rules, the company that developed and maintained the once-thriving Harmony blockchain, have accused the company's current co-founders of misconduct and mismanagement.

Five former team members and several developers within the Harmony ecosystem told DL News that CEO and founder Stephen Tse exerted "control" over employees, leading to a sharp decline in Harmony's users and developers over the past 12 months.

These employees accused another founder and second-in-command, Li Jiang, of "mismanagement," resulting in Harmony's funds plummeting from $1 billion at the beginning of 2022 to around $50 million now.

In a striking incident, several former team members reported that a disgruntled ecosystem developer physically attacked Tse in Harmony's Palo Alto office, claiming Tse violated a $250,000 funding commitment.

Chaotic Start

Harmony was one of the "Layer 1" blockchains that saw its value soar during the 2021 crypto 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 was its transaction fees, which were significantly cheaper than those of the dominant Ethereum blockchain.

Last year, Harmony's total locked value peaked at $1.42 billion, a figure used to measure the assets deposited in DeFi protocols on the blockchain. Harmony's flagship application was a fantasy RPG game called "DeFi Kingdoms," which was wildly popular among cryptocurrency enthusiasts, and the trading price of the chain's native token, ONE, was also on the rise, nearing its peak. Things seemed to be going well.

But 12 months later, the blockchain has become a deserted "ghost town."

Remaining assets are less than $6.9 million—a 95% drop. Developers have virtually ceased all activity. The price chart of the ONE token looks like what cryptocurrency traders call a "pump and dump," rather than "the future of finance."

While many attribute Harmony's collapse to the $100 million hack of the Horizon bridge in June last year, former team members, ecosystem developers, and community members also point to the executive team's culpability.

Harmony's ecosystem developers detailed their willingness to communicate with the blockchain leadership, stating that they received "no response for weeks," and that the process became "increasingly difficult," leading to Tse and Jiang "not sincerely making new arrangements," breaking investment commitments.

"Forced to Play Basketball Every Day"

One former employee described Tse's classic behavior: he would shut down employees' laptops during work to grab their attention, forcing the employee to "play basketball for over an hour every day… no matter how busy."

Another insider even suspected that if they did not comply with the request to play basketball with Stephen, they might lose their jobs.

Another former employee recounted how Tse treated team members: he would grab employees' arms—sometimes during conversations, sometimes at company events—moving them "like pawns," gossiping about them behind their backs, and belittling them in front of colleagues.

"It was well known that he would interrupt employees saying, 'You can take a few minutes of my time now. Do you have any questions for me?'" "If you didn't have questions to ask Stephen, he would be disappointed, saying he would return in a few minutes, hoping you would be ready with questions when he came back."

This employee was forced to "play basketball for over an hour every day… regardless of how busy he was."

Another former team member said, "He often came over to force you to say something or to ask something, whether you wanted to or not."

"I Want to Cry, Say Something That Moves Me"

The insider also said that Tse "often stood in front of us saying, 'I want to cry, say something that moves me.'" He would make us tell a story that could touch him, which was strange."

Former team members also claimed that Tse did not provide team members with full-time employee status, instead making them work as contractors. One insider stated, "They hire full-time employees and pay them as contractors." He explained that due to their contractor status, employees did not receive adequate vacation time or benefits.

Many employees contracted with Harmony reported that they worked far beyond the hours stipulated in their contracts, as they did not receive vacation or other benefits.

"Stephen's Nose Might Be Broken"

Of course, the most shocking incident occurred on July 5, 2022, when Tse was physically attacked in Harmony's Palo Alto office. Three former Harmony team members who witnessed the attack stated that Hochung Nam, co-founder of a project funded by Harmony, struck Tse.

The project was initially called 1wallet when Harmony funded it, but it was later renamed Timeless Wallet. It was a community project of Harmony, developed by Tse's friend Zi Wang, which received a $1 million grant commitment to build a so-called "social wallet for 100 million users on Web3."

According to two insiders, the project was promised an initial $250,000 grant. One insider revealed that Wang and his partner Nam developed the project with their own funds, believing that the Harmony Foundation would cover these costs.

Both insiders stated that Tse ignored communications regarding "Timeless Wallet" and violated the investment commitment. As a result, Nam came to Harmony seeking answers.

"Hochung came to Harmony's Palo Alto office and talked to Stephen about this," said one former team member who witnessed the attack. "They had a disagreement, calling Stephen a fraud… Nam punched him in the office. Everyone in the office saw it."

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

The same source 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 might be broken."

"I think (they) ultimately received less than $100,000," one insider said.

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

Neither Tse nor Nam responded to DL News' request for comment.

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

Deep Financial Troubles

Multiple insiders stated that by mid-2022, poor financial management left Harmony with almost no cash to pay any previously promised grants.

One former team member stated, "As the last bull market cooled down, Harmony's funds dropped significantly from nearly $1 billion." "Li did not diversify the funds well, concentrating most of the funds in one company."

"He never tracked the funds we promised to the grantees, nor did he hold the promised funds in stablecoins. When the market crashed, the promised grants collapsed as well."

On-chain data shows that Harmony's treasury is currently entirely held in ONE tokens. After trading at a high of $0.35 at the beginning of 2022, ONE is now trading at around $0.02.

The wallet address published by Harmony's official Twitter account shows that Harmony's wallet is worth about $50 million. However, due to the lack of liquidity in the trading market for ONE, the actual value of the treasury may be much lower.

"Misstatements by a Small Number of Employees"

"We strongly oppose this statement," Jiang said in response. "It sounds like misstatements from disgruntled former employees now working for our competitors."

He stated that the issues facing Harmony stem from the June Horizon bridge hack and the cryptocurrency liquidity crisis triggered by the collapse of the Terra blockchain, hedge fund Three Arrows Capital, and the recent FTX collapse.

"I chose to stay at Harmony to help our ecosystem and team bounce back," he said. "We recently hired 10 full-time team members, including experts from the Ethereum ecosystem and top schools like UC Berkeley. We have laid out a roadmap for protocol scalability and user adoption this year, and we are working hard."

Obsession with DAOs

In addition to poor financial management skills, Tse and Jiang's obsession with DAOs further drained Harmony's funds. In 2021 and 2022, the two committed to funding "10,000 DAOs" through a grant program.

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

DAOs have achieved some success, with popular Ethereum DeFi protocols like the liquid staking platform Lido and decentralized exchange Curve thriving under decentralized structures. However, due to unclear regulatory frameworks targeting DAOs, the concept has become a tool for scammers to make money.

"We Should All Read Yuval Noah Harari!"

Documents posted on the Harmony Notion site show that senior team members frequently opposed the DAO plans. In an off-the-record Q&A, Jiang did not address people's concerns but became philosophical. Written records show he stated, "We should all read Yuval Noah Harari's three books to see how Web3 and DAOs will become the dominant narrative of humanity in the 21st century."

"The whole team was urging them not to lose focus," said one ecosystem developer.

When Harmony finally began funding DAOs through its grant program, it did not go as planned.

The threshold for cash disbursement was low. Several DAOs received six-figure grants simply for writing proposals. DAOs often received five-figure rewards for achieving low targets, such as reaching 1,000 Twitter followers or 100 Discord members.

Posts on the funding forum show that Tse and Jiang burned through Harmony's funds, funding dozens of DAOs—some of which took the money with little to no return.

"For a while, we required the team to join 100 DAOs every month," said a former Harmony employee who worked on the grant team.

"The reason was that Stephen wanted as many DAOs as possible, even though in my view he did not really understand what a DAO was, and the team thought it was a terrible idea."

The same source also confirmed that there were no standards for assessing and approving DAO proposals until the projects were nearing completion. Another former team member stated, "The projects that received funding were often those that Stephen and Li Jiang personally liked."

"Surreal Moments"

One of the most controversial DAOs funded by Harmony's grant program was Blu3 DAO—a community organization focused on empowering women and non-binary individuals in the crypto space. On February 18, 2022, Blu3 DAO posted a proposal on the funding forum and received a $1 million grant from Jiang in less than 24 hours. An insider claimed that the decision to fund Blu3 DAO was made during a dinner at the ETHDenver conference.

Members of the Harmony team were surprised by this, calling it a "surreal moment" for someone to casually commit to donating $1 million to someone they had only recently met.

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, Blu3 DAO core team member Jess Furman expressed gratitude for the $75,000 received from Harmony before the funding program was paused, but stated that it "is no longer an official partner of the blockchain."

DeFi Kingdoms Exits

The reckless distribution of DAO grants has cost Harmony dearly. Ecosystem developers began to leave the blockchain. Legitimate projects like DeFi Kingdoms, which Tse and Jiang had previously promised to fund, also lost focus. Ultimately, they abandoned building on Harmony. According to data from the crypto metrics platform Artemis, only 12 active developers remained.

"We decided to stop development on Harmony and move to another blockchain for several reasons," said Bolon Soron, an anonymous lead of DeFi Kingdoms.

"For weeks, we had received no responses from the Harmony team, while these random DAOs seemed to get all the attention."

"For a while, communication and technical collaboration with the Harmony team became increasingly difficult. Their team also decided not to fulfill agreements made months ago and showed no willingness to make new arrangements."

Another anonymous developer in the Harmony ecosystem stated, "As a participant trying to build real value on Harmony, this is very disappointing and frustrating."

By the end of 2022, Harmony's prospects seemed bleak. But a recent development might bring a glimmer of hope.

On January 23, the FBI confirmed that it had traced over $60 million in stolen assets from the June Horizon bridge hack to the North Korean criminal group Lazarus Group. A week earlier, Binance CEO Changpeng Zhao confirmed that his exchange had frozen about $2.6 million in Bitcoin related to the hack.

Of the eight co-founders who launched the Harmony project in 2018, only Tse and Jiang remain. All former Harmony employees who spoke to DL News requested anonymity due to concerns about Tse and Jiang. "Tse loves to sue," one insider said.

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

One ecosystem developer stated, "I wonder how the outcome could be so bad." "The oversights over the past 6 to 12 months have been truly shocking."

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