Billionaire tech founder Ryan Breslow is locked in a legal battle over allegations that millions of dollars were stolen from an emerging altcoin project Movement DAO. Breslow, who founded the successful payments company Bolt in 2014, is suing a developer previously convicted of federal bank fraud and money laundering charges and hired in 2021 to design the new venture.
Establishment of the altcoin project and alleged fraud
Ryan Breslow, along with crypto entrepreneurs and fellow litigants Alex Fine and Jon Gordon, came up with the idea of Movement DAO (‘decentralized autonomous organization’) in 2021, envisioning it as a community-led platform for funding social impact causes. Like other DAOs using Blockchain-based governance to rally around a common cause or goal, Movement members would contribute funds and vote on how they would be spent. Breslow suggested that the DAO could help social movements like Black Lives Matter raise funds through a BLM token or crowdfund a Dogecoin-themed dog park for residents of Miami’s South Beach. He hoped to replace gofundme and traditional NGOs with an ‘untrusted funding’ platform that would allow communities to hold leaders accountable.
The Movement DAO, scheduled for release this January, has apparently disappeared into its own black hole. The Discord server is no longer accessible and hasn’t tweeted since last August. According to a complaint filed by Breslow in Florida Southern District Court last month, two-thirds of the altcoin project’s seed funding was allegedly stolen by the rogue developer. Of the more than $16 million (over 97% of its total assets) contributed by the DAO’s founding partners, only $5.5 million remains today. Most of the money was provided by Breslow, Fine and Gordon. According to their lawyers, around $300,000 has been invested by all other members of the DAO community.
‘In short, you stole the keys to the kingdom and kicked out their owners’
Lawyers for Breslow, Fine, and Gordon wrote a letter to indicted developer Mark Phillips in February. “In short, you stole the keys to the kingdom and locked up their owners,” said a warning letter alleging theft and embezzlement. They also added, “As we recently learned about your criminal record, we understand that you are familiar with criminal fraud laws.”
Plaintiffs allege that they met with Phillips around July 2021 and were impressed by his alleged experience as a coding engineer with security clearance for the Securities and Exchange Commission. A website that appears to be owned by Phillips is now detailing his expertise in Blockchain governance and ‘SEC reporting’. Nitoj Singh, Philips’ attorney from Nitoj Law, denied Breslow’s “nonsense” allegations in a statement. Singh said, “It’s unfortunate that Mr. Breslow is trying to ‘rug-pull’ the Movement after convincing Mr. Phillips and others to join the effort with promises of a six-year commitment. But the Movement is a separate entity, not Mr. Breslow’s personal wealth, and cannot impose its personal will on the DAO, regardless of its own financial problems.”
Breslow and his attorney did not respond to a request for comment, and it is unclear what due diligence (if any) was made prior to hiring Phillips. The SEC did not respond to questions about his previous employment. But for Phillips, a simple Google search would reveal that the technologist had been convicted in 2010 by the US Attorney for the Western District of Washington of four counts of radio fraud, two counts of money laundering, and one mail fraud that was subsequently reversed.
It is unclear what happened between Phillips’ early release in 2013 and his entry into the Movement DAO. As of 2020, he was advertising consulting services and describing himself as ‘physically and figuratively pushing buttons’. The DAO’s co-founders say the first few months of work on the project went smoothly. Phillips created a multi-user wallet authorized for seven people, five of whom must approve the transfer of any endowment funds. It has also issued authorization tokens that will allow signatories to do so.
“He reassured us, but…”
However, the plaintiffs allege that Phillips has quietly consolidated his power over the altcoin project. They say they are ‘encouraged’ to hand over authorization tokens because Phillips has ‘repeatedly assured that they are trustworthy’. For example, when faced with changes to Phillips’ DAO’s website that would allow him to have more control over his wallet, Breslow, for example, says, “he assured me that he did not believe he had any authority in the proposals, stating that no one had read them.”
The plaintiffs also cite Dao-lawfirm.eth, a “crypto-savvy law firm” that Phillips claims is holding on behalf of the DAO. The complaint alleges that Philips has offered to pay Dao-lawfirm.eth about $390,000 in ‘deferred legal fees’. Archived versions of the website Dao-lawfirm.eth show the name of Reed Yurchak, the attorney who defended Phillips in his fraud case against the US government. The current version of the website does not contain any references to Yuchak or to providing legal services. Breslow’s attorney claims that Dao-lawfirm.eth is an alias used only by Phillips.
Breslow and his investors were eventually startled by a series of proposals Phillips made to the DAO’s uninitiated voting platform, pushing it to shut it down in December 2022. cryptocoin.com As we report, Phillips ignored calls to return capital, stripped Breslow of the voting rights, and transferred roughly $2.9 million into accounts allegedly belonging to him or his associates, such as defendant Benjamin Reed, who he retained to work on the project in February 2023. allegedly transferred at least $8.8 million in various cryptocurrencies to a DAO account under his control. Transaction histories reviewed by Forbes show that these funds were indeed moved and eventually transferred to accounts linked to the defendants via Ethereum Blockchain domains.
How is the altcoin project doing now?
Breslow claims he discovered Phillips’ criminal record only after confronting him about the unauthorized transfers. Also, DAO’s request to return authorization keys was denied. Since these keys are the only way the co-founders can access the DAO’s secure wallet without them, they are effectively locked down. The lawsuit alleges Phillips argues that early changes to the DAO meant that the project gave its backers the authority to move money without needing to document expenditures.
A hearing is scheduled for March 16 for Breslow to impose a temporary restraining order on Phillips and the remaining assets of the DAO. Breslow’s attorney Christopher Berg from Ellis George Cipollone O’Brien Annaguey alleges in an affidavit that it is becoming increasingly difficult to trace transfers from the DAO as Phillips uses anonymous crypto wallets and small transfers to launder stolen tokens.
Breslow, who describes himself in court filings as a U.S. Virgin Islands resident, stepped back as Bolt’s CEO in January 2022 to become chairman of the board after the company raised a $355 million round worth $11 billion. His departure comes just two days after he posted a controversial Twitter rant about payments rival Stripe and startup accelerator Ycombinator.
Movement DAO had equally lofty goals to bring Blockchain-based accountability to the world of charitable giving. But with the altcoin project supposedly in Phillips’ hands, and the Movement’s fate tied to a court battle, for now, Breslow’s public philanthropy is a similar but less ambitious offering, offering free dance classes in Miami, Los Angeles, and New York. appears to be limited to the nonprofit The Movement.
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