Syscoin, a crypto project that predates Ethereum, is expected to undergo leadership changes in the coming days amid allegations of mismanagement and a lack of financial transparency.
Key members within the Syscoin Foundation, a non-profit established to further project development, intend to resign and form a new entity, Syscoin Red, according to several sources who spoke with Decrypt.
Internal disputes around funding allocations between the foundation and a separate for-profit entity, SYS Labs, have flared, leading those within the foundation to lose faith, sources say.
The new entity aims to restore transparency and trust within the Syscoin community, with a clear delineation over who controls the project’s funds, according to foundation board member and treasurer Willy Ko.
“The foundation’s treasury wallet is not a multi-signature wallet,” Ko told Decrypt, alleging SYS Labs CEO Jagdeep Sidhu holds sole control. “I have raised concerns about the lack of transparency on using the foundation’s funds.”
Though the project may be unfamiliar to most crypto users today, the 10-year-old layer-1 project once commanded a sizeable following, promising to combine features from both the Bitcoin network and Ethereum.
At its height in January 2022, the total market capitalization for the project’s native token, SYS, stood at roughly $775.3 million. That figure has fallen to just under $80 million, CoinGecko data shows.
Sys Labs executives Sidhu, Chris O’Shea, and Michiel Naring are at the center of these allegations, Matthew Mappin, former business development manager at SYS Labs, told Decrypt.
"The Syscoin community has publicly raised significant concerns with Sidhu, Naring, and O’Shea regarding the lack of financial transparency, the obscure relationship between the Syscoin Foundation and SYS Labs, and in particular concerning the management and unclear use of foundation funds,” he said.
Following Decrypt’s investigation, Sidhu now intends to step down as CEO of the foundation, a person familiar with the matter said. Sidhu has yet to return a request for comment.
Over the past decade, Syscoin’s vision to be community-driven and develop a Bitcoin-forked platform has been hampered by internal issues, multiple sources within the organization told Decrypt.
A lack of experience and direction from the management team has led to numerous problems, preventing Syscoin from taking a strong market position, they claim.
Additional sources within the organization say there has been a lack of transparency over how executives from SYS Labs handle funding for the Syscoin network.
Established in 2022, SYS Labs is meant to play a role in the Syscoin ecosystem by developing tools, technologies, and services that enhance the platform's functionality and usability.
While there is some overlap between the two Syscoin entities, sources within the foundation say funding between SYS Labs and the foundation lacks oversight, particularly when it comes to funding ventures under the SYS Labs brand.
O’Shea, SYS Labs’ chief financial officer, disputes this, telling Decrypt the foundation manages the treasury in accordance with its statutes.
“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,” O’Shea wrote in an emailed statement.
O’Shea did not divulge which individual or individuals hold control over those wallets.
Expenses include wages for various team members, marketing, core development, infrastructure development, RPC services, external development teams, legal and compliance, and other costs, O’Shea said.
“On average, the monthly operational costs have varied between $200,000 and $300,000,” he said.
The Syscoin Foundation has various agreements in place with SYS Labs to provide initial funds for startup costs in the form of grants and “other considerations,” SYS Labs' chief operating officer Naring explained to Decrypt.
“These funds were intended to cover the early stages of development, ensuring that the projects could establish a solid foundation and attract further investment,” he said.
“The Foundation's support was crucial in the early stages, but as mentioned, these products have since become self-sustaining and are primarily funded through venture capital and angel investments.”
The “dual approach” ensures that the foundation can help incubate projects while also allowing them to become independently sustainable, Naring added.
However, according to Bradley Stephenson, a board member of the foundation, there has been little movement on that front.
Development for the Syscoin network has stalled, and Sys Labs, tasked with creating new software and technologies that leverage the Syscoin blockchain, has produced little to that effect, Stephenson added.
“SYS Labs was supposed to develop applications that would drive the adoption of Syscoin,” Stephenson said. “Instead, what we’ve seen over the last two years is almost no applications that have been delivered.”