Former Ethereum advisor accuses Vitalik and ConsenSys co-founder of "fraud and bribery," Bitcoin OG joins the fray

Author: Kaori, BlockBeats

The increasing centralization of Ethereum has become a hot topic in the crypto community. Vitalik stated last May that no liquid staking pool should exceed 15%, yet now Lido, Coinbase, and Binance together account for over 85% of staking. The Ethereum Foundation has also acknowledged the existence of "corporatization, centralization, and systemic threats" within Ethereum.

Related reading: 《Interpreting the Consensys Paper: Is Ethereum Becoming Increasingly Centralized?》

The community's doubts are growing louder, with some even calling Vitalik a dictator. Recently, some active voices in the crypto community have even questioned whether Vitalik and other Ethereum founders engaged in improper operations during the Ethereum ICO and bribed senior SEC officials.

On November 2, under a tweet by crypto KOL Tiffany Fong regarding the SBF trial, former Ethereum advisor Steven Nerayoff commented, "Clearly, Ethereum is the elephant in the room, even overshadowing the FTX case. Joe Lubin and Vitalik Buterin have always been at the forefront of corrupt officials in federal agencies, such as Clayton (former SEC chairman) and Gensler (SEC chairman)."

Subsequently, the crypto media Bitcoinist published an article titled "Ethereum Insider Drops a Bombshell: The Fraud of ETH Founders is Worse than FTX Fraud," which drew community attention.

Nerayoff shared this article, stating, "Interestingly, I have never spoken to any reporters, yet they believe I wrote these articles. This article does not say I have no evidence, just that I have not disclosed it yet. If they think I don't have any, they wouldn't say that. Although I have revealed a lot to those who are paying attention."

In addition to these latest accusations, Nerayoff also tweeted that someone in Ethereum concealed the true number of Ethereum ICO buyers, stating, "Whales can hide their large positions during the ICO."

Steven Nerayoff Faces Ongoing Disputes, His Identity as an Early Contributor in Doubt

Steven Nerayoff is the founder and CEO of Alchemist. LinkedIn information shows that Nerayoff has served as an advisor or investor for several projects, including Ethereum, tZERO, Polymath, and Casper Labs. He claims to have invented the "Utility Token" and ICO (which later evolved into IEO and IDO) during the Ethereum crowdfunding period, and at tZERO, Steven designed the first regulated security token (TZROP) for the security token offering (STO).

However, a 2019 CoinDesk report mentioned allegations of extortion against Steven Nerayoff in an article, stating that as of March 1, 2018, Nerayoff was a member of the advisory board for tZERO, a security token trading platform under retail giant OverStock. A 2017 press release from OverStock described him as the "architect of the Ethereum ICO."

According to CoinDesk, early Ethereum staff stated that he did participate, and he was involved in the conception of Gas, but those descriptions might be somewhat exaggerated and far from the driving force implied by his resume. A tZERO spokesperson stated that tZERO has no relationship with Nerayoff and his company Alchemist, which was previously a paid advisor for the tZERO token issuance, but tZERO has since terminated the consulting relationship.

At that time, the fraud charges against Steven Nerayoff referred to his alleged plan to extort a U.S. startup, which he was hired to guide for an ICO in 2017. The charges claimed that he, along with his employee Michael Hlady, demanded $4.45 million from the company, and if convicted, he could face up to 20 years in prison.

In May of this year, a New York judge dismissed the fraud charges against Nerayoff, stating that they had obtained significant exonerating evidence and "could not prove the allegations in the indictment beyond a reasonable doubt," thus ending a three-and-a-half-year legal battle.

However, Steven Nerayoff's disputes have not ended. In September, Nerayoff stated that Vitalik Buterin and his father Dmitry Buterin jointly accused him of extorting the Ethereum ICO, damaging his reputation, "This is a coordinated, meticulously planned character attack by father and son, aimed at making me their scapegoat." Nerayoff also claimed that Virgil Griffith, a senior researcher and developer at the Ethereum Foundation, was abandoned by Vitalik after being "convicted of helping North Korea evade sanctions."

Months have passed, and the community has yet to see substantial accusations from Steven Nerayoff. Nerayoff even stated in a recent tweet that Twitter has restricted his traffic (banned & tags), "Why did views drop from hundreds of thousands to millions in late September and early October to just a few thousand?!"

Conspiracy Theory? What is ETHGate

In the comment section of Nerayoff's posts, another keyword is prevalent—ETHGate.

Supporters of ETHGate claim that the Ethereum Foundation and ConsenSys have established close relationships with key figures within the SEC and institutions like JPMorgan, ensuring a favorable regulatory environment for Ethereum.

The term emerged because the SEC classified Ethereum as a non-security while treating XRP and other competitors more harshly.

Related reading: 《Another Heavy Blow to Crypto Giants? A Review of the SEC's Entanglements with Crypto》

In the SEC's case against Ripple, Ripple's lawyers seized on a critical weakness of the SEC—former Director of the Division of Corporation Finance Bill Hinman stated in a 2018 speech that ETH should not be considered a security. However, before making this ruling, the SEC chose not to disclose Hinman's materials, insisting on their confidential nature.

Additionally, ETHGate supporters believe that Ethereum co-founder and ConsenSys founder Joseph Lubin established insider connections between Ethereum and the SEC.

Within two months of Jay Clayton's appointment as SEC chairman, Lubin hired Patrick Berarducci from Sullivan & Cromwell law firm, where Jay Clayton was a partner before becoming SEC chairman. The community believes this may have provided Ethereum with an insider track or at least brought it closer to the SEC.

Supporters of ETHGate also hope that Steven Nerayoff possesses more insider information.

Are Bitcoin Bulls Also Involved in This Ethereum Farce?

Former OverStock CEO and Bitcoin advocate Patrick Byrne also shared this news, stating, "Keep a close eye on this story; you'll see its connection to me." Patrick Byrne resigned as OverStock CEO in August 2019, admitting to participating in the FBI's investigation into whether Russia influenced the 2016 U.S. presidential election. In January 2014, OverStock became the first major retailer in the world to accept Bitcoin payments.

Some media even claim that because Ethereum bulls are more favored in the crypto market than Bitcoin, Ethereum maximalists assert that Ethereum can surpass Bitcoin at any time, leading Bitcoin extremists to panic and raise fraud allegations against Ethereum.

However, in the comment sections of these questioning and accusing tweets, most community users remain cautious, generally voicing that Nerayoff has not provided substantial evidence, and speculation and hearsay cannot affect Ethereum's status, "The title of this article is shocking, but the actual content is zero. What are these accusations? What evidence do you have to support them? How is it bigger than FTX?"

Did the Ethereum ICO really involve improper fraud and bribery of senior SEC officials? Steven Nerayoff claims he will provide answers soon, but his response is, "My goal is to disclose everything as much as I can, so everyone can decide for themselves. I created another platform that cannot be censored, so I will post here (Twitter) and there (new platform)."