Alex Saunders may have raised ‘millions’ for a stablecoin project despite personal debt
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Crypto influencer Alex Saunders has been raising money for an algorithmic stablecoin project for months, despite owing a six-figure personal debt to a US YouTuber since early March, Stockhead can reveal.
Saunders appears to have raised well over US$1 million for the project since April, and perhaps much more. (The Australian Financial Review reported that Saunders had raised US$11 million.)
James May, a 43-year-old crypto enthusiast based in Rutland, UK, showed Stockhead screenshots indicating that he messaged Saunders about investing in the project in April, after Saunders put out a feeler on his popular Facebook group.
Saunders described the “Decentral Bank” project in a few paragraphs and told May he could invest in a seed round by sending US$50,000 in Tether or USDC to this address.
May told Saunders he was after some more information “than a few bullet points” and put him off.
He also thought it was strange that Saunders never asked him to sign a non-disclosure agreement about the nascent project, “which as an investor did ring alarm bells”.
“The last thing I would want was to invest into a new brilliant project only for another member to pinch it!” he told Stockhead.
“I backed out and didn’t chase Alex up and he didn’t ask me again,” May said.
But token transfers from that wallet address suggest many others did. Some US$1.2 million in stablecoins were sent to that address in the space of two weeks in April, mostly in US$25,000 and US$50,000 increments.
Funds from that wallet were also transferred to the crypto derivatives exchange FTX, sometimes within minutes of arriving.
Saunders borrowed the crypto on March 16 and was supposed to repay it in a week, but Armstrong said last week he still hasn’t received it.
Saunders also approached three others in the space for personal loans, according to screenshots they posted on social media last.
Since then, a number of investors in the Decentral Bank project have told Stockhead they are seeking their funds back. None were willing to comment publicly.
The AFR also reported that “several anxious parties are looking to reclaim their investments with Tasmanian-based Mr Saunders”.
Saunders has told Stockhead he’s eager to speak publicly about the controversy, but needs permission from his lawyer.
While initial investors apparently sent funds without a white paper – or any kind of legal agreement – Saunders later developed the former.
Melbourne podcast host and crypto enthusiast Jordan Michaelides showed Stockhead a 14-page internal report on the project that Saunders sent him in July, written by University of Technology Sydney economist Nidad Aliyev.
Stockhead isn’t posting the entire document because it could be considered proprietary, but here is the first page.
“The critical mass (minimum economy size) is important for the DCB system to be successful and the strong network effects will certainly be a key strength of the project,” Aliyev writes in one section.
“YouTube followers of Nugget’s News, access to other influential Youtubers, and other marketing efforts will certainly help to take the project off the ground.”
Aliyev didn’t immediately respond to a message sent to him on Linkedin.
Saunders also sent Michaelides two other shorter documents on the project, with one saying that “40,000,000 sold in seed round – $0.05 per token = $2,000,000 seed raise at $50M Fully Diluted”.
Michaelides said he didn’t invest.
“F..k no,” he told Stockhead. “My immediate though was, this is very un-Alex.”
Michaelides said when he saw Saunders’ first Facebook post in the Collective Shift group about the project, “I 100% assumed his account was hacked. Then he confirmed the next day.”
While a number of people are working on algorithmic stablecoins projects, Michaelides said, “I thought it was mad hubris to think HE and only he had the solution to a supposed stablecoin issue that I personally had never seen.”
Saunders may have also exaggerated in spruiking his fundraising efforts.
Saunders “said he wanted me to lead a project, yet nothing ever materialised,” Skella tweeted Sunday, linking to screenshots that backed up his story.
I don't know a great deal about it: Alex has grand plans for a stablecoin and Block8 may be backing it. Many months ago he asked me if I would manage the project, which I said I would be interested in doing, when/if he got it off the ground (which hasn't happened yet).
— Jamie Skella (@JamieSkella) July 23, 2021
Sydney-based blockchain venture studio Block8 issued a statement yesterday saying it was seeking legal advice following allegations that Saunders had misrepresented Block8’s involvement in the project, which the studio said simply amounted to “preliminary advisory services”.
Statement regarding Alex Saunders pic.twitter.com/EG8uYdsZJa
— Block8 (@block8_com) July 27, 2021
Saunders last month sold his subscriber-based crypto news platform Nugget’s News to his business partner Ben Simpson, the Australian Financial Review reported. The business has rebranded to Collective Shift.
Simpson told Stockhead on Friday that Saunders, who had been listed as a contractor for the platform, “is not a contributor or Content Creator at Collective Shift.”
In a video statement to members over the weekend, Simpson said that from time to time members had approached him about Saunders being unreliable or owing them money.
“He’s always reassured me that it was all under control, and there was nothing to worry about, and I believed him, because I trusted him,” Simpson said.
Then after Hex founder Richard Heart posted screenshots a week and a half ago showing Saunders asked him for a 20 Bitcoin personal loan, Simpson said he confronted Saunders about it.
“He looked at me straight in the eye and said ‘don’t worry about it, there is a couple of people I owe money but I am on repayment plans, and it’s all under control,” Simpson says in the video.
Simpson said that since that conversation, more have come forward claiming they’ve been asked for money or are owed money.
“You know, if it’s all true, honestly, I’m horrified,” Simpson says.
Blockchain Australia, the peak industry body that Saunders was a board member of in 2019, told the ABC it was aware of the claims about Saunders’ financial problems and had been in contact with Saunders, who told them the claims were being handled by his lawyer.
“We have formally requested Mr Saunders respond,” Blockchain Australia said.
FTX founder and CEO Sam Bankman-Fried has also responded to users on Twitter about the funds being moved to his exchange.
(we acknowledge this and have fully escalated internally)
— SBF (@SBF_FTX) July 25, 2021
Meanwhile, Decentral Bank still has no website or publicity until the controversy. Saunders told some investors the project was in “stealth mode,” according to screenshots.
A “scoping canvas” document provided to Stockhead by Michaelides suggests that the project could take six months to a year to launch.