Former advisor Steven Nerayoff hypes Ethereum scandal exposé

Ethereum whistleblowers Steven Nerayoff and TruthLabs have alleged numerous incidents of misconduct by early Ethereum insiders, with Nerayoff currently teasing the release of apparently never-before-heard audio recordings of Vitalik Buterin.

Nerayoff is promising to reveal scandalous evidence that he believes proves that Buterin copied his idea of issuing utility tokens via ICOs. He is also threatening to sue over his supposed invention.

Of course, fraud by third-party creators who simply used the Ethereum platform to create scam tokens or NFTs is nothing new. Many Ethereum ICO fundraisers during the 2017-2018 craze turned out to be doomed. Indeed, most ICOs have fallen to near-$0.

Similarly, most NFTs are now worthless. Ethereum insiders, however, are not responsible for those scams.

What is new, however, is the fact that Steven Nerayoff and an unrelated researcher, TruthLabs, have both alleged misconduct by Ethereum founders and their allies and want to release the supposedly irrefutable evidence.

Read more: These six-figure NFTs are down 99%

Steven Nerayoff: Baffling yet impossible to ignore

Nerayoff makes sweeping claims that are often difficult to understand, yet he does speak with some authority. He was a former legal advisor to the Ethereum Foundation. He claims that Vitalik Buterin once lived with him in New York and worked in an office that Nerayoff rented for the benefit of Ethereum.

Some observers used to dismiss most of Nerayoff’s claims due to his personal credibility taking a hit when the US Department of Justice (DoJ) charged him with criminal extortion in 2019. However, a New York judge dismissed that charge in May 2023, cleaning up his reputation considerably.

Although Nerayoff has posted his recent, Ethereum-related claims to X, he says his legal team is working on organizing all the documents involved to substantiate his new claims. Curiously, he claims to have created a non-X platform to ostensibly ensure that the information he publishes will not be censored.

On November 14, he promised to publish specific allegations against Ethereum insiders “within 48 hours, hopefully less.” There have, however, been delays, with Nerayoff claiming that logistics and the creation of NFTs were responsible for most of the hold-ups.

Did Vitalik Buterin ask Nerayoff to rescue the Ethereum Foundation?

Nerayoff claims that one of his upcoming NFTs will include a 2015 recording of Vitalik Buterin asking Nerayoff for a “rescue plan” for the Ethereum Foundation.

A transcript of Nerayoff’s appearance on one of Mario Nawfal’s “Twitter Spaces” indicates that the NFT will include audio asking Nerayoff to help restructure the Ethereum Foundation.

This continues Nerayoff’s pattern of claiming he created many of the standards that made Ethereum successful, including the ‘fungible’ tokens behind ICOs. The ERC-20 standard originally described the most commonly used API for Ethereum-based fungible tokens. The document doesn’t list Nerayoff as a contributor unless he was going by a pseudonym.

Nerayoff and TruthLabs question Ethereum’s The DAO

TruthLabs supposedly found evidence that the Ethereum Foundation and were behind the infamous hack of The DAO that precipitated the hard fork between Ethereum (ETH) and Ethereum Classic (ETC).

Read more: Ethereum centralization is becoming a serious problem

According to Nerayoff, the DAO hack was an inside job. Publicly, was hit hard, and eventually sold to in 2019. rebranded to BC Development Labs.

So, what did the Securities and Exchange Commission (SEC) say about The DAO? According to Commissioners, The DAO insiders sold DAO tokens as unregistered securities. However, the SEC declined to file charges in that particular case.

Nerayoff and TruthLabs also call out ex-SEC Director Bill Hinman

By now, it is no secret that former SEC chief William Hinman likely had an Ethereum-related conflict of interest while working for the SEC. Protos has previously covered Hinman’s financial conflict of interest and its potential impact on the SEC v. Ripple case.

Bill Hinman routinely met Simpson Thacher & Bartlett employees, which received funding from a pro-Ethereum entity, including an employee who worked for its Hong Kong division. Hinman also did not divest from his financial interest in the Simpson Thacher, which had done work for the Ethereum Foundation, despite being warned to by the SEC’s ethics office.

However, according to Nerayoff, the corruption among government officials might go far beyond just William Hinman’s opining that ETH offers were not securities transactions. 

A transcript of a Mario Nawfal X audio space reveals that Nerayoff believes the SEC, DoJ, and FBI fabricated charges against him. “They were looking to get as many people in this industry as possible. And that all started at the very same time,” he said. He also implied that Hinman was in on the Ethereum inside job.

Some individuals were skeptical. However, attorney Michael Scotto opined that Nerayoff “has a case.”

Nerayoff acknowledged that his lawyers advised him not to post about it in a lengthy X post. However, he says he cares more about holding people accountable than the money he allegedly lost.

Mistakes in Gary Gensler’s MIT course?

Prior to becoming chairman of the SEC, Gary Gensler taught a course about blockchain at MIT.

TruthLabs has questioned why Gensler used this class to spread, in TruthLabs’ opinion, false information about Ethereum’s history. According to TruthLabs, his allegedly false teaching material included Gensler’s claim that Canadian VCs mostly supported Ethereum during its pre-ICO days. Rather than Canadian money, as Protos has covered, Ethereum’s extensive ties to Chinese money. If deflecting attention from China to Canada was intentional, TruthLabs posits that William Hinman might not be the only SEC official with an interest in misrepresenting Ethereum’s financial ties.

Other claims made in Gensler’s lecture on Ethereum included the idea that Joseph Lubin bought 10% of the ICO. Lubin disagrees with this percentage, claiming he never owned more than half a percent of Ethereum’s supply.

Nerayoff called Lubin out on this, citing a video in which Lubin said buying large quantities of tokens, or buying them to speculate, could become a sign that the token is a security.

Read more: Here’s why ‘news’ attacking Gary Gensler is all over crypto media

Revisiting Ethereum’s ties to China

Anyway, TruthLabs claims that Chinese entities Wanxiang Blockchain Labs and Fenbushi Capital were involved in setting up some of Lubin’s Ethereum wallets.

Protos has previously covered Ethereum’s extensive ties to Chinese money

TruthLabs also found evidence that Wanxiang Blockchain Labs set the Ethereum Foundation wallet up. Wanxiang’s Dr. Xiao Feng went on record about its early support for Ethereum, pledging $500,000 to help launch it.

TruthLabs also notes a coincidence that Wanxiang Group and MIT announced a ‘partnership’ in March 2018. TruthLabs notes that it is possible that Chinese government-connected individuals could have used proxy or puppet entities to exert influence over Ethereum.

Laura Shin’s book, The Cryptopians, detailed allegations that Vitalik Buterin tolerated an out-of-place Chinese national named Ming Chan, who served as the Ethereum Foundation’s executive director, for a curious span of time — even after she clashed with other foundation members.

Interestingly, Chan assumed that role in 2015 — the same year that Nerayoff alleges Buterin asked him about restructuring or saving the Ethereum Foundation.

Ethereum also famously published its whitepaper first in two languages: English initially, and then Chinese.

Finally, and somewhat off-topic, Nerayoff makes yet another assertion: Vitalik Buterin could have shorted Ethereum at some point.

Awaiting evidence from Steven Nerayoff, TruthLabs

In summary, Nerayoff and TruthLabs’ allegations are seemingly impossible to ignore. However, it’s important to remember that they are just that: allegations. 

Nerayoff claims to be releasing another round of evidence today or tomorrow and intends to fight for his intellectual property rights in court. 

Ethereum initially wanted to build a decentralized digital asset ecosystem. Much of its initial marketing billed it as a “world computer” that could be used for blockchain applications like smart contracts. However, since inception, Ethereum has maintained strong ties to Chinese executives with curious motivations. 

Both Nerayoff and TruthLabs claim to be interested in publicizing their version of the truth about Ethereum’s origins and initial motivations. Many observers have been and will continue to await their allegedly irrefutable evidence.

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