Key case findings
Pierson was Director of Communications at Ava Labs, working at the core of their operations, with a direct line to founders, CEO Emin Gûn Sirer, COO Kevin Sekniqi, and President John Wu.
Barone was a key senior engineer working at the heart of Ava Labs. He was responsible for setting up and operating the Avalanche network.
Manafort was a growth marketer at Ava Labs, and a GameFi analyst at Avalanche Foundation.
Drew Pierson quickly tipped us off that there might be something up with Avalanche decentralization.
According to public declarations, a not-for-profit organization called Avalanche Foundation governs the Avalanche network and directs the development of its protocol.
In this arrangement, Ava Labs, a for-profit corporation where Emin works as CEO, supposedly just works for the foundation as a developer, while holding vast troves of AVAX tokens for insiders and venture capital investors.
But it appears that it is Ava Labs that is really in charge:
| “ | ... that's a dog and pony show ... for chiefly legal reasons |
| “ |
... it's
supposed to be a free and open network for all ... but in reality, NO WAY |
Has Ava Labs also secretly centralized the Avalanche network itself?
Enter Fabio Barone, a Ava Labs senior engineer in Latin America who played a central role setting up the network,
which makes is perspective hard to dispute.
| “ | ... I did all the server setup ... all the updates... all the monitoring ... |
Digging deeper, it seems that Ava Labs uses its vast trove of AVAX tokens, held for insiders and venture capitalists,
to join large numbers of validator nodes ("servers") to the network to make money for itself.
| “ | ... this is not public information ... but we were maintaining more than 100 servers ... a lot more than the community ... they [Ava Labs] also have the rewards ... too much power ... |
The centralization of AVAX tokens within Ava Labs, combined with the large number of validators
they operate, appear to allow them to control the network.
| “ | ... they practically have control of the network .... |
Barone validates concerns about the proportion of the AVAX token supply held by insiders and investors.
| “ | ... the concentration of tokens in the hands of the company ... an issue to me |
Barone has ethical concerns about the project.
| “ | ... Avalanche is suddenly not the most ethical ... in many aspects. |
| “ | They are there to enrich themselves. |
The centralization raises several concerns:
(For example, Emin has revealed that Ava Labs buys meme coins hosted by Avalanche, which could increase their liquidity and volatility, and encourage speculators to buy them, but he has not indicated whether Ava Labs engages in similar activities for their AVAX token. The danger is that if they are providing price support, and it is later withdrawn, investors could get caught by factors they were unaware of. Historically speaking, many tokens from centralized operations have been manipulated, then later come down to earth.)
Crypto Leaks invites Ava Labs to provide the following information:
Pierson described the chaotic environment at Ava Labs.
“In all honesty, it was probably that it was also the internal
founder's team,” Pierson said. “It was a college professor who's
never had a job before, and his best student who also never had a
job before. And they are constantly [on] iPads, like constantly."
(Referring to Emin Gün Sirer and Kevin Sekniqi.)
| “ | ... a college professor who's never had a job before ... |
"I'd be on the phone with one, one minute and I'd pick up a call
from the other telling me to do the exact opposite… I almost
ended up being like a spy on them at one point because they
were just running around. So, I think it's a little bit of just them
being unable to execute.”
| “ | I almost ended up being like a spy on them at one point |
Regarding the co-founder and senior executives, Pierson said: “They're not aligned at all,”
adding that Emin “checks out."
| “ | They're not aligned at all |
This implies that John Wu, the professional President from Tiger Global brought in to help safely steer Ava Labs is having a tough time.
Pierson then made another revelation:
"He [Emin] was gone last year like six months of
the year because he's from Turkey — he has family there."
| “ | He was gone ... like six months of the year |
"People couldn't get to him. He wasn't picking up his Chief of Staff's calls. Where's Emin? I
don't know.”
| “ | He wasn't picking up his Chief of Staff's calls |
Drew how Emin supported a project on Avalanche
called “Stars Arena,” despite obvious red flags and security issues,
and against his team's advice.
| “ | It kinda raised the red flag. |
The project was hacked and lost $3M, and investor's money stolen.
According to Pierson, Emin “came in swinging, saying, 'I vouch for this team,'” despite not knowing where the project's founder was, what his name was, or in which country the project was based.
“Do you want to be on social media saying this person is my best friend when you basically don't even know anything, and they're doing weird things about this security posture?” Pierson said.
“The founders lost their mind,” Pierson added.
“This team was being very unusual about their security audit,” he recalled. “They were kind of rejecting it, kind of stonewalling the team, trying to help, which is, you never see that. I was like, yes, please, God help us. We're so tiny. So that caught my attention. And then they got exploited. And then it kind of raised the red flag.”
Pierson added that he felt the company “was doing really well on its own” adding that he “didn't see the need for the Avalanche team to commit to this and say this is the next best thing since sliced bread.”
Then Stars Arena was hacked, and the investor money
was stolen, but Emin continued to support his poor decision, by
treating the hack as a minor event.
| “ | Emin ... who for reasons I don't know, I have guesses ... had very unusual sleep schedules |
Pierson complained that Emin “who for reasons I don't know, I have guesses, had very unusual sleep schedules. I wake up to like a 4 a.m. tweet saying, '3 million is nothing.' You guys are just like all the people who got your money. It's nothing. Now you guys are just whining.”
Pierson was exasperated over Emin's behavior. “So the founder of Avalanche is tweeting this,” he said. “He tweeted this because he felt, despite my advice, he had gone on such a limb for them already, he needed to keep doubling down and saying, 'we'll get all this back.’”
“I fought a losing battle,” he said. “However, I could make jokes because the Avalanche community was online saying, 'Can someone in PR get Emin, the founder of Avalanche, on the phone and get him to shut up because he looks like an idiot?’”
Despite the fiasco, Emin wanted to go on a rant
on Twitter, while his team was unable to contain him.
According to Pierson this would have even meant calling up the
head of sales in Turkey, telling him "'If you need to drive to
Emin's house and take his damn phone away from him...' You
know, doing things like that. And that was the whole weekend.”
| “ | drive to Emin's house and take his damn phone away from him |
Emin also tried to rally his Avalanche Twitter army to cover up the Stars Arena fiasco.
According to Pierson, Emin's response was, “we need to rally the troops.”
But Pierson pushed back, saying, “there's no way.”
“I talked him down,” Pierson recalled. “He wanted to go out
after that three million tweet and he saw that criticism, like, how
can he say $3 million is nothing? He wanted to go on just the
craziest Twitter thread. And that was my only win. And it was
just shut up… We're going to be quiet.”
| “ | And that was my only win |
Fabio Barone, the former Ava Labs senior engineer, characterized Emin as an “egomaniac” who is quick to attack and criticize other blockchain projects.
“He's got a half-crazy reputation,” Barone said. “I don't know if the right word is crazy, but more in terms of being that self-centered.”
Barone describes Ava Labs' manpower: “There are nerds who don't come out.
They don't consume, they don't drink, they don't do anything.
There are drug addicts. There are those who are only thinking
about being rich. There are egomaniacs.”
| “ | There are those who are only thinking about getting rich |
“Avalanche makes decisions however they like,” he said. “Whenever and however, they want to.”
He added that Avalanche is “unpredictable from the point of view that they decide. It's a company and they don't consult anyone.”
Zac Manafort, a former growth marketer at Ava Labs and GameFi analyst at Avalanche, explained that Ava Labs is operating a cancel culture, blocking out anyone voicing criticism and labeling them as toxic.
“The people that are working in the foundation or at Ava Labs can't see what's going on. It's like, 'Okay, you're a toxic person. We're going to block you.'”
“You're just surrounding yourself with people who are only positive and saying good things about you,” Manafort said about Emin.
According to Manafort, Emin negligently retweeted scam projects causing the community “long-term PTSD.”
For instance, Manafort said, “a basketball player named Dwight Howard posted that he was going to Avalanche to launch a project. The founder retweeted it, and it turns out that this Dwight Howard account was one, either compromised, or two, Howard himself was sold a grift by a very well-known marketer who lives in the UAE, who's doing a lot of these celebrity launches.”
I was away from the keyboard for literally 4 days and came back to see *the Dwight Howard* join the @AVAX family! https://t.co/qjf7OZynz4
— egs9000🔺 (@el33th4xor) January 18, 2024
According to Manafort, “it ended up basically being a whole scam, grift, rug pull, which, of course, the founder had retweeted and said welcome to Avalanche. So that kind of drew a whole bunch of long-term PTSD from a lot of people.”
The Dwight Howard NFT scheme on Avalanche generated so much negative buzz that Ava Labs eventually distanced itself, even though Emin had initially pumped it.
According to Pierson, Avalanche rallies their employees to attack competition and Avalanche “is still feuding with another founder over meme coins.”
“Myself and a lot of people think that's insane,” he said.
Avalanche also misled reporters about rumors about Polygon, a competing company, to hurt the protocol.
According to Pierson, “Polygon and Avalanche don't get along, and had an amazing opportunity from a reporter who actually called me up as a source asking me if I heard this negative thing about Polygon and having the opportunity to say, 'yeah, I did,' and seeing that come into fruition in a major traditional newsletter, whether or not I had actually truly heard that.”
“Well, who's to say?” he challenged.
“But, you know, when you're talking to reporters, you're
hanging out with them all the time,” he said. “You have the
ability to say, 'See that guy at that chain over there? He sucks.’”
| “ | You have the ability to say, 'See that guy at that chain over there? He sucks' |
Ava Labs also spreads false information about its technology by secretly paying Sports Illustrated for a Box Office ticketing partnership.
Pierson said Avalanche is about to announce a Sports Illustrated ticketing partnership, and people might potentially buy a ticket through Avalanche.
“Avalanche pays Sports Illustrated you know. But that's not how that story will go down,” he said. “It's going to be that Sports Illustrated will tell that our technology is so good.”
“That's what's bullshit,” he said.
Many retail investors will likely purchase AVAX tokens because they falsely assume that Sports Illustrated chose to use the Avalanche blockchain purely for its technology.
Manafort explained how Ava Labs' marketing strategy was to poison the community with information about other chains, mainly Solana.
According to Manafort, “The way we decided to handle it was not to go after Solana as a whole, but it was just kind of, as you mentioned, to drop a little poison in. It was like, 'Hey, here's how long Avalanche has been running,' and we know there's some chains out there without naming them specifically that have rolled back or kind of defeat the purpose.”
Ava Labs decided to pay grants to NFT artists publishing on its platform.
However, rather than using existing NFT services on Avalanche to distribute the grants, a business development manager chose an NFT service from another chain, causing uproar in the community.
According to Pierson, "there's a strong suspicion that they will have gotten tokens from a potential client because it leads to very puzzling behavior that doesn't seem to make sense unless they were quietly holding some tokens."
"It was true that that decision was frankly baffling,"" he added. "It was true that our community was an uproar, and a lot of us felt they had a right to be pissed."
The revelations from prior Crypto Leaks reports weighs heavily on many Ava Labs team members, increasing their already rapid staff turnover. And it also has other effects.
Here Pierson talks about the effect of our Case 3, which shared covert video footage of corrupt Ava Labs lawyer Kyle Roche explaining how he weaponized the legal system against Ava Labs' rivals (his firm did this in return for receiving AVAX tokens from Ava Labs worth hundreds of millions of dollars at the time of writing, which it is indisputable he and other partners at the Roche Freedman law firm received).
Pierson relays that in the wake of Crypto Leaks Case 3, and
internal employee concern, Lee Schneider, General Counsel of Ava Labs (who previously represented Block.one), tried to wave off Kyle
Roche's admissions about Ava Labs by claiming Kyle Roche must have been drunk. However
that did not move a United States federal judge who was unpersuaded by Roche's attempt at an after-the-fact
explanation for his damning admissions.
| “ | I wouldn't be surprised if this sinks them |
With regards to Crypto Leaks: "at some point there's
going to be a delayed reaction and the cumulative effect of all these little scoops or whatever
they're calling them is gonna turn into a thing."
| “ | ... cumulative effect ... is gonna turn into a thing |
Crypto Leaks Note: in the above video, Pierson mentions an the Australian journalist, who recorded Emin Gün Sirer storming out of an interview, has no affiliation with Crypto Leaks whatsoever, and we were not involved in setting up the interview, or in any other way. To the best of our knowledge, he asked Emin honest questions about our Avalanche Bridge revelations (which shared publicly verifiable blockchain tracing data).
Pierson described how they spoke to a friendly reporter, asking them to write a counter story
to discredit Crypto Leaks, and the report "guaranteed us anonymity" and that they had the
green light from Emin.
| “ | ... guaranteed us anonymity ... |
Then at the 11th hour, their General Counsel, Lee Schneider, said "Please don't do this."
Using a friendly reporter to create a story about Crypto Leaks would not invalidate the
hard evidence and covert video footage that we share, and instead just draw more attention
to it.
| “ | Please don't do this |
Pierson says: "I couldn't not see how the story is sympathetic to us" because it would be
written by "our most friendly reporter."
| “ | ... our most friendly reporter ... |
Pierson reveals how he was under pressure from the founders to respond to Crypto Leaks:
"Founders always get frustrated because they ... they would always yell at us."
| “ | ...[the] Founders ... they would always yell at us |
"Again, the only advice we say is like, ignore it."
In a desire to present itself to business, government and regulators in a favorable light, Ava Labs spends tens of millions of dollars on lobbying, currently using the leading firms FS Vector, Hill & Knowlton, Van Scoyoc and Associates, and Holland & Knight.
By cosying up to regulators at enormous expense, they have so far escaped the scrutiny being levied at so many other industry players.
This is our 5th case covering Ava Labs.
One reason we cover Ava Labs and Emin Gün Sirer, is their actions also highlight broader issues within the blockchain industry.
Crypto Leaks seeks to shine light on certain practices in the industry that harm all participants. Rather than address them, Ava Labs and its founder issue denials and continue engaging in their harmful actions.
Crypto Leaks goal in reporting is to either get actors like Ava Labs to change their ways, or if they will not do so, to alert market participants and empower them to make informed decisions based on the facts.
Pierson, as Director of Communications, was involved with devising practices to ensure that we could not extract more information from inside Ava Labs. Here he describes the process they put in place:
Read more case investigations...