There was an uproar in the Ethereum community after members noticed on Tuesday that mStable distributed 3.1M MTA to investors who bought the tokens at $0.15 days before they were listed compared with a listing price of $3.5. This would have granted them with instant liquidity that could have given them a 24X return just three days after the initial sale.
The team swiftly responded to the concerns and decided to take the tokens out of circulation for three months.
1/ We apologise sincerely for recent events.
Our community is mStable’s greatest asset and I hope the actions outlined below go some way to show how committed we are to this project and its community over the long-term.
Learn more: https://t.co/MZExTXiwC2
— mStable 🧮 (@mstable_) July 22, 2020
Red Flags and FUD
Critics’ main concern was that early investors would immediately start cashing out in MTA, depressing the price. This was fueled by an actual price drop of about 25%.
In reality, though, it appears that sellers were traders reacting to the news that mStable had distributed the tokens to early investors, but weren’t the early investors themselves, according to on-chain data tracked by Dex Blue co-founder Angelo Ming.
MTA had its initial sale via an auction on the Mesa platform for a total of 2.66 million tokens, on Saturday. Two days after, the token that had been bought by investors for $0.15 was trading at $3.5.
Unclear Distribution
mStable’s team announced that the early investors who received the tokens spontaneously approached them and made a legally binding commitment to lock their tokens for three months. They committed to send the tokens back to the address from where they went sent within 24 hs and were also publicly supportive of mStable.
Even though mStable’s team had publicly announced that 2.8% of tokens would unlock from day one and 11% would unlock at Q3 (which included early investors), it was not clear that a whopping 3.1M would be ready to sell four days after the initial sale.
mStable apology
mStable’s team apologized stating that they hadn’t been transparent enough in communicating that the tokens would be unlocking during Q3, and not in the last month of Q3.
Additionally to locking the early investors’ tokens for three months, mStable’s CEO & cofounder, James Simpson, will start his vesting period within six months instead of three. The new and more granular vesting periods for both investors and the team have also been updated to provide more clarity.
mStable committed to being fully transparent going forward and will announce when tokens are released publicly through their different channels.
While deals for early investors and vesting periods that spur fear of whales “dumping on retail” sounds very much like the ICO days one of the key difference with 2017, is that many projects already have products that deliver value and are seeking to distribute it among their communities by expanding the governance of their systems. In this case, there was no on-chain governance, but the community did speak out and the team responded accordingly.
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