Syscoin execs accused of unauthorized creation of 100 million new SYS tokens

Syscoin, one of the oldest blockchain platforms globally, faces allegations of a sustained conspiracy to manipulate the supply of its SYS token and allegedly defraud investors through the Syscoin Foundation.

Established in 2014, Syscoin aimed to merge the best aspects of Bitcoin and Ethereum, offering a stable platform for decentralized applications. In 2018, the Syscoin Foundation was created to support and develop the platform.

Allegations of Fraud against Syscoin

A recent report by the Dogecoin Foundation raises concerns of serious misconduct within the Syscoin Foundation and SYS Labs Holding Ltd. Investigations are reportedly underway into potential financial crimes involving these entities.

Directors Jagdeep Sidhu, Willy Ko, Christopher O'Shea, Michiel Naring, and Bradley Stephenson stand accused of issuing 100 million new Syscoins without proper authorization. According to a source quoted by Cryptopolitan:

"It was an adversarial move intended to dilute the token supply and conceal financial mismanagement."

The issuance of these additional tokens was allegedly disguised as a legitimate community vote. Christopher O'Shea, using the pseudonym "BigPoppa," submitted a proposal that was supposedly approved by the community.

However, the authenticity of this vote is highly questionable. Allegations suggest that it was either fabricated after the fact or conducted in secrecy, excluding most of the community.

The Syscoin Foundation claimed that the new tokens would bolster the foundation's reserves and support the ecosystem.

However, the Dogecoin Foundation alleges that the funds were diverted to SYS Labs, enabling the directors to profit while leaving the foundation and its investors facing financial harm.

João Fernandes, the head of business development at Rollux, reportedly proposed redirecting Syscoin's masternode governance budget to the Rollux project.

The Dogecoin Foundation claims that Rollux was initially developed and funded by the Syscoin Foundation. However, once the project reached a certain stage, it was transferred to SYS Labs, significantly increasing its value and the personal holdings of the directors.

Official Intervention

The allegations have drawn the attention of Dutch authorities, prompting a criminal investigation. The Functional Public Prosecutor's Office is reportedly examining potential financial crimes, including theft, embezzlement, fraud, forgery, and money laundering.

The fallout from these actions has had severe consequences for Syscoin investors. The issuance and sale of 100 million additional tokens reportedly caused the token's value to plummet.

The Dogecoin Foundation's report also accuses the directors of failing to file corporate tax returns, stating:

"Intentionally failing to file a corporate income tax return or filing an incorrect return constitutes a criminal offense."

This is a serious offense under Dutch law.

CEO Denies Resignation Claims

On July 25th, Decrypt published an article reporting that Jagdeep Sidhu would resign amidst the unfolding allegations. The article claimed he intended to establish a new entity called 'Syscoin Red.' Willy Ko commented:

"The foundation's treasury wallet is not a multi-signature wallet. I have raised concerns about the lack of transparency on using the foundation's funds."

Matthew Mappin, a former business development manager at SYS Labs, reportedly stated to Decrypt that the community had repeatedly raised concerns with the directors regarding "the lack of financial transparency, the opaque relationship between the Syscoin Foundation and SYS Labs."

On the same day, Sidhu took to Twitter to refute claims of his departure from Syscoin. He dismissed Decrypt's article as an attempt to spread fear, uncertainty, and doubt (FUD).

O'Shea, for his part, told Decrypt that "Treasury funds are held in a cold wallet, and on a monthly basis, an amount is transferred to a hot wallet to cover operational and ecosystem expenses."