A storm of accusations of abusing the foundation’s funds is currently blowing inside.
The community members are pointing their fingers with rage at the management board, and not excluding the starting ones.
The current management, in pursuits of keeping the transparency they raise as a slogan, replied with admitting that the managing process did not go as it was supposed to do, however, denying in the same time that any misused the funds in the foundation’s custody.
Along with that, the management’s tone sounds to have softened, with them promising of a radical reconstruction and more controlled spending policy.
February 11, 2019, | AtoZ Markets - This week, the NEM secretarial team, which represents the executive committee and board of the NEM Foundation, made an open announcement to its community, stating that the NEM Foundation “everybody knew before is gone.” This was the company's final statement and did not come as a surprise, as most of the NEM community members expected such an outcome from the Singapore-based Blockchain project. What future awaits NEM?
What did cause NEM to fail?
According to the NEM secretarial team, the funding faced serious financial difficulties, and the management realized that the previous organizational structure of the company had failed.
Reportedly, after the current NEM Fund Management Team took an office on January 1, 2019, a thorough financial audit was conducted. The result of the audit showed that the organization is running out of XEM (the national currency of the NEM blockchain platform) and trust funds.
As per experts, the financial position of the NEM Fund has deteriorated to such an extent that, as of January 1, 2019, they have a reserve fund for one month of operational financing only.
The company financial report touched upon some of the alleged causes that led to the current funding problems, including the displaced goals of the key employees, duplicated efforts, inconsistent success rates, little responsibility for funds and questionable return on investment (ROI). As a result, the fund burned up to 9 million XEM per month (approximately $ 350,000).
Among other factors that contributed to the NEM failure, the company officials mentioned so-called "crypto winter" from which many crypto and blockchain projects has not recovered yet.
Community members took a more accusatory tone
One particularly active NEO community member under the name Jelin 1984 accused the former president of the NEM Foundation and co-founder Lon Wong of abusing the foundations' funds for his own interests.
Pictured below, Wong, the ex president of the foundation was specifically accused of spending the company's funds on developing another crypto project called ProximaX.
Additional information published by the NEM Foundation showed that from December 2017 to January 2019 the company spent 80 million XEM (approximately 3.1 million US dollars). The accusation Wong received is complicated by the fact that NEM and ProximaX continue to maintain very close working relationships.
Wong, in his turn, published in his blog the following answer to the accusations:
"During the term of office of the President of the NEM Foundation, I, along with other members of the NEM Foundation Council, wisely managed our funds. We requested only 50% of the fund, which was approved for 2017."
Former NEM president continues denying the charges. Alexandra Tinsman the current president of the NEM.io in the community defending Wong stated:
“No one blames Lon for receiving funds. Please do not distribute this misinformation. Lon Wong was a co-founder and first president of the NEM Foundation, who began his activities in early 2017, two years after the launch of NEM. Lon left the NEM Foundation in April 2018. Since then, he has been involved in a project called ProximaX, in which he is president. NEM Foundation wishes Lon and ProximaX success in the future. "
Another community member, Jleony, accused the foundation employees of using the funds for personal enjoyment and profit. He stated the following:
"What a pity that the staff of the NEM Foundation used the foundation for personal pleasure and profit, regardless of the success of the project."
Tinsman answered to the aforementioned charges with the following message :
“Hi, this is not true. No one used the means for personal pleasure. In 2017 and 2018, no effective policies were introduced that would cover all expenditure data, but from the data we have we see that funding was mainly spent on marketing, events, salaries, travel, and training. From 2018, we share full transparency with the developers during the audit. That is why the new restructuring of the NEM Fund was immediately put into effect. The new policy and the transition to a product-oriented structure provide complete transparency for the community regarding how the funds will be spent and distributed. "
Since the company announcement, interested members of the community and investors sent questions to the executive committee to get more information on the current state of the company.
Receiving information occasionally, the president of the NEM Foundation, Alexandra Tinsman, confirmed to Jelin 1984, that they must legally cover all of their bases before publishing additional information. Tinsman made the following statement:
“Please know that I understand how everything looks confusing, and we are working to bring all the information to you and the community in a timely manner. In part, this means that we must take additional steps to ensure that we are legally and correctly exchanging information - this takes time. ”
The NEM foundation in few lines
NEM Foundation started in 2017, two years after the launch of NEM (XEM), a ready-to-use enterprise level blockchain platform. The Foundation is based in Singapore and responsible for the development and promotion of NEM. According to the company website, the sole purpose of the organization is "to introduce, train and promote the use of the NEM blockchain technology platform for all industries and institutions around the world." NEM co-founder Lon Wong was the founding president of the Foundation until his retirement in early April 2018. After that, Christoph van de Reck served as interim president of the company until December 14 when Alexandra Tinsman (pictured below) was elected as the new president along with newly elected members of the executive committee and council.
According to the Foundation rules, only eligible members of the NEM can vote in the NEM board elections. The participants must be at least 21 years old, pay an annual membership fee, and meet the "Know Your Customer" (KYC) requirements.
Although Tinsman has repeatedly stated that the NEM Foundation operates as a separate organization for the NEM blockchain platform, the actions of the NEM Foundation have an undeniable influence on the XEM price, as noted by a member of the Dan_V community. He stated following in his post in one of the NEM community forums:
“I understand that the Foundation is not NEM, however, it looks like it has an incredible ability to cripple most of its parts - either because of strife, unprofessional behavior on the part of councilors or simply the lack of guidance for NEM as a whole.”
The company announcement of January 31, 2019, about a significant change to its mode of operation due to the recent downturn in the cryptocurrency, destroyed more than $ 65 million from a single-day market capitalization of XEM.
Company officials try stay positive about company future
Despite the drama of the situation, the management of the company does not lose its enthusiasm. According to their announcement, the current financial and operational problems of the NEM fund are solvable. Representatives of the Singapore blockchain project have proposed a number of radical changes that need to be applied to the work of company funds and operations:
"We have completely restructured the operating structure and mission of the NEM.io Foundation. We are waiting for the update and start from scratch. This means a new focus under this new leadership and the NEM Foundation, which really exists to serve and support its influential community."
As it became known from the message of representatives of the firm, they are changing from a decentralized advertising organization to a product-oriented organization with more traditional reporting lines.
After the reorganization process, fund employees and contractors will have to provide their report to one of seven product managers, including the chief technologist, the head of product management, the chief financial officer, the business development director, the chief operating officer, the marketing director, and the revenue director.
Product managers will be required to report on performance and provide ROI directly to the board and the community. According to the available information, all funds spent will be directed to the head of the finance department (CFO) and will meet accounting standards.
The fund will also drastically reduce the budget, namely, reduce the previous level of burning 9 million XEM per month by 60 percent, suspend all partnerships and projects until further notice, and also reduce the number of staff out of 150 people through planned layoffs.
According to the company's management, all changes are aimed at transferring the foundation from the organization based on promotion, including marketing and training, to a more traditional, centralized business model based on income and product development.
Also, the company plans to raise additional funding in the amount of 160 million XEM (approximately $ 6.2 million).
Alexandra Tinsman, the President of the NEM Foundation, in a recent interview confirmed that the full report on the restructuring and the funds requested is at the final stage of preparation. After that, the final report will be provided to the community as soon as the main developers and legal groups have time to consider the proposal and conduct an audit.
Think we missed something? Let us know in the comments section below.